Incident: Yatai Group released its 2013 interim report on the evening of August 29. During the reporting period, the company's operating income was 6.223 billion yuan, up 27.27% from the same period in 2012; net profit attributable to owners of the parent company was 187 million yuan, down 44.10% from the same period in 2012; and basic earnings per share was 0.1 yuan. Comment: The gross margins of the cement, coal, and real estate sectors all declined. During the reporting period, the company still achieved a good year-on-year increase in operating income, mainly due to the sharp increase in real estate revenue and changes in the scope of mergers to increase the number of subsidiaries, but the profit situation was not optimistic. Looking at the cement sector, due to sluggish downstream demand, the cumulative cement production in the Northeast region in the first half of the year was only 58.64 million tons, down 6.05% from the previous year, while the average price of high-standard cement fell by about 30 yuan/ton year on year. Affected by this, the gross margin of the company's cement sector fell 2 percentage points to 35% year on year. However, in the coal sector, affected by the sharp decline in coal prices, its gross margin dropped sharply by 15 percentage points to 6% year on year, and is basically in a state of loss. In the real estate sector, as projects in Songyuan, Changchun, Shenyang, and Nanjing entered the settlement period one after another, revenue increased sharply by 64% year on year, yet gross margin fell 3 percentage points to 25% year on year. Furthermore, the company's period expense rate was 24%, which is basically the same as the same period in 2012. Investment income contributed more than 90% of profit. During the reporting period, the company's investment income accounted for 92% of net profit, which became the main source of the company's profit. The increase in investment income is mainly due to the Bank of Jilin's increase in earnings according to the equity law and the sharp increase in equity investment income of Northeast Securities. Among them, Northeast Securities achieved net profit of 308 million yuan in the first half of 2013, which has greatly exceeded the level of 151 million yuan for the full year of 2012. The leading position in the region continues to be consolidated. At the beginning of this year, the company completed the acquisition of 80% of the shares of Liaoning Zhongbei Cement, 80% of the shares of Liaoning Jiaotong Cement, and 100% of the shares of Heiniugou Quarrying Company. Currently, the company's share of clinker production capacity in Liaoning has increased to 12.6%, and its regional influence has further expanded. Under the strategic guidance of the “whole cement industry chain”, the company has formed an industrial chain dominated by “clinker cement, aggregate machine sand, commercial concrete, and cement components”, and is a leading cement enterprise with an absolute advantage in the region. Furthermore, through integration within the company, the cement sector has formed a vertical industrial chain with the upstream coal sector and the downstream real estate sector, further enhancing the company's profitability. Furthermore, the company signed a cooperation agreement with Rasien in 2012, and the North Korean market is expected to gradually open up. Profit forecast and investment rating: Affected by the slowdown in economic operations, the gross margin of the company's main business declined significantly. We lowered the company's earnings per share from 2013 to 2015 to 0.37 yuan (-18.65%), 0.45 yuan (-18.27%), and 0.57 yuan (-17.4%). In view of the company's leading position in the Northeast region and its high performance elasticity, we maintain our “excess holding” rating. Risk factors: cement prices have fallen sharply in Northeast China; coal prices have fallen sharply; real estate regulation has deepened.