The company recently released its 2011 first three quarterly reports (see attached pages to this report for key data), and the performance was not as good as expected. This is mainly reflected in the fact that although there was no significant decline in the company's revenue in the third quarter, its profitability weakened. In particular, it is worrying that the month-on-month decline continues to weaken. The overall performance for the whole year was basically lower than expected. The three quarterly reports also revealed that a large number of new orders have been signed since this year. As a result, we adjusted the 2011 EPS to 0.026 yuan and the 2012 EPS to 0.102 yuan, which is a conservative forecast. The general forecast shows that the EPS for 2011-2012 was 0.034 yuan and 0.120 yuan, respectively. There are two main reasons for the poor performance in the third quarter: 1. The decline in gross margin in the third quarter: The gross margin for the third quarter showed a decline compared to the first and second quarters. The gross margin for the first and second quarters was still above 21%, while the gross margin for the third quarter had fallen to just over 19%. In addition to raw material prices, which have been high since the second half of last year (raw material prices in the second half of last year were higher than the first half of last year, and the production cycle of the company's products caused the cost of products confirmed in the third quarter of this year to be higher than the cost of products confirmed in the first half of this year), it is also an important reason why the revenue of high-margin products confirmed in the third quarter was lower than that of the previous two quarters. 2. Other operating income caused a loss of 9.57 million yuan: The difference between the cost of the merger and acquisition of Suzhou Heavy Industries and the identifiable fair value of the acquired assets is shown as non-operating income as goodwill. In other words, the cost of mergers and acquisitions is greater than the identifiable fair value of the assets being acquired, and goodwill is negative. This is a one-time loss, and after considering taxes, the impact on EPS is minimal. Furthermore, revenue for the third quarter was close to 2.03 billion yuan, which is better than the first quarter and the second quarter. Compared with the same period last year, the difference was not significant, and it can even be said that it was the same (revenue for the third quarter of last year was 2.07 billion yuan). However, due to customer reasons in the third quarter of this year, revenue of nearly 850 million yuan will be delayed until next year. A net profit margin of 2.12% is still assumed. This delay caused the third quarter EPS to drop by 0.0028 yuan, a drop close to 29% (without this delay, the third quarter EPS would be around 0.0098 yuan). Thus, the main reason for the large year-on-year decline in performance in the first three quarters is that compared with the same period last year, monetary policy is tightening, inflation remains high, labor costs have risen again, and the overall macroeconomic environment is negative. In the face of poor overall market conditions, in order to maintain revenue, the company had to reduce prices and promote (the price reduction for some products even reached 40%), and various promotional expenses followed an increase, which led to a year-on-year increase in expenses for the period (management expenses rose close to 10% year over year, and sales expenses increased 20% year over year). Cash prices have been tightened, and the poor macro environment has also caused the company's customers to delay payments, so the estimated asset impairment losses have to rise.