The company's performance was slightly better than our expectations. In 2011, the company achieved operating income of 8.749 billion yuan, a slight increase of 1.84% over the previous year; realized net profit of 423 million yuan, a sharp decrease of 46.44% over the previous year; basic earnings per share of 0.06 yuan; and the profit distribution plan was 10 payments of 0.063 yuan, with no transfer. The company's performance was slightly better than our expectations. The net profit growth rate was much lower than the revenue growth rate, mainly due to: gross margin fell by 3.19 percentage points, continued to be sharply accrued to bad debt provisions of 243 million yuan, an increase of 89.2% over the previous year, a decrease in government subsidies, and a 59.75% year-on-year decline in non-operating income. Competition for complete metallurgical equipment is fierce. Product prices have declined, and gross margin has declined. Last year, the company's complete metallurgical equipment achieved revenue of 2,344 billion yuan, a year-on-year decrease of 6.01%, a revenue share of 26.79%, a decrease of 2.24 percentage points. For the first time, it ranked second below heavy pressure vessels, with a gross profit margin of 9.12%, a sharp decline of 5.8 percentage points over the previous year. Affected by the financial crisis and the country's macro-control policies, etc., the steel market is sluggish, investment is declining, competition in the metallurgical equipment market is fierce, and product prices have dropped sharply. In a situation where material costs and labor costs remain high, the decline in gross margin is an inevitable result. The large-scale casting and forging business also faced the same dilemma. Last year, it achieved revenue of 1,448 billion yuan, a decrease of 24.53%, a decrease of 5.78 percentage points in revenue, and a gross profit margin of 24.54%, a decline of 14.05 percentage points. Heavy pressure vessels have increased revenue and increased gross margin. Among the four major businesses, the company's heavy pressure vessels performed best. Last year, the company's heavy pressure vessels achieved revenue of 2,596 billion yuan, an increase of 34.25% over the previous year, accounting for 29.67% of revenue, an increase of 7.16 percentage points, becoming the number one main business; the gross profit margin was 29.55%, an increase of 4.46 percentage points. Last year, fixed asset investment in the petrochemical industry (chemical raw materials and products) grew by 26.4%, an increase of 11.6 percentage points over the previous year. The company's market share of forging and welding hydrogenation reactors in the domestic petrochemical industry reached 90%; last year, it undertook orders for pressure vessels of 5.19 billion yuan, an increase of 1.39 times over the previous year, making it the only growing variety among the four major businesses. Nuclear power equipment expects the project to restart last year after the safety plan and medium- to long-term development plan were introduced. The company's nuclear power business achieved revenue of 1,202 billion yuan, a year-on-year decrease of 14.99%, a year-on-year decrease of 13.74% of revenue, a decrease of 2.72 percentage points. This is the first time that the share of nuclear power equipment revenue has declined; the gross profit margin is 38.98%, up 1.72 percentage points from the previous year. The company has a very high market share in domestic nuclear power forgings and nuclear reactor pressure vessels. Currently, it holds orders of around 5 billion yuan (excluding tax), and expects the project to restart after the safety plan is introduced. Profit Forecast and Valuation The Company signed a new contract of 14.25 billion yuan last year, a decrease of 13.36%, lower than the forecast of 16 billion yuan, and is expected to sign a new contract of 18 billion yuan this year. We expect to achieve EPS of 0.08, 0.12 and 0.17 yuan from 2012 to 2014, maintaining the target price of 5 yuan and the “increase in holdings” rating.