Event description Lianyungang released its 2013 three-quarter report. The company achieved operating income of 1,118 million dollars in the first three quarters, a year-on-year decrease of 8.57%, gross margin decreased by 0.14 percentage points to 28.19%, net profit attributable to the parent company was 143 million yuan, an increase of 4.76% year-on-year, and EPS of 0.18 yuan. In the third quarter, the company's revenue fell 15.37% year on year to 351 million, gross margin fell 3.30 percentage points year on year to 24.88%, net profit attributable to parent company fell 6.14% year on year to 45 million yuan, and EPS was 0.055 yuan. Incident review Q3 The performance of the main business declined, and taxes and COSCO Shipping's liquidation made up for the profit gap. In the third quarter, the company's operating income fell 15.37% year on year, and gross margin fell 3.30 percentage points year on year. In the end, the net profit realized in the third quarter fell 6.14% year on year, a marked decline from the 10.58% growth rate in the first half of the year. Net profit performance in the third quarter was superior to gross profit (-25.29%) because: 1) since October last year, the company's main business was changed from sales tax to value-added tax, and business tax fell 94.95% year on year; 2) COSCO Shipping Liquidation and other investment companies improved operations in the third quarter, and investment income rose 97.66% year on year; 3) income tax fell 71.63% year on year. The quarterly EPS for the 1-3 quarters were: 0.055 yuan, 0.066 yuan, and 0.055 yuan, respectively. The decline in revenue increased in the first three quarters, and the profit growth rate declined slightly. The company's operating income and costs for the first three quarters fell 8.57% and 8.39% year on year, respectively, and gross margin decreased slightly by 0.14 percentage points. Gross profit fell by 31 million yuan year on year, yet net profit still increased by 0.06 billion yuan (4.76%) year on year. The growth rate of container throughput at the New Oriental container terminal is rising. In January-September, the container throughput of the New Oriental container terminal in which the company participated increased 11.64% year on year, which is basically the same as 11.05% in the first half of the year, but faster than the overall growth rate of 7.5% nationwide. Among them, the container throughput of New Oriental Containers in the 3rd quarter rose 13.56% year on year. Maintain a “Cautious Recommendation” rating. The company's future fundamental highlights mainly come from: 1) the development of the port industry in the hinterland; 2) the expansion of liquefied product handling business; and 3) the increase in cargo volume brought about by the China-Japan-Korea Free Trade Zone. We maintain the company's EPS forecasts for 2013-2015 at 0.21 yuan, 0.26 yuan, and 0.28 yuan, respectively, and corresponding PE of 16.53 times, 13.39 times, and 12.65 times, and maintain the company's “careful recommendation” rating.