Investment highlights: The company announced its 2010 annual report: The company's 2010 operating income was 8.046 billion yuan, up 32.62% year on year; net profit attributable to owners of the parent company was 141 million yuan, up 427.54% year on year, and EPS was 0.25 yuan. Fourth-quarter results fell short of market expectations. Non-operating income, such as government subsidies, was the main factor in the increase in performance throughout the year, yet the company's performance in the fourth quarter suffered a loss, and the performance fell short of market expectations. The cost rate during the company period was high, and management efficiency needed to be improved. The company's expenses rate reached 20.3% during the period, which is higher than that of similar companies in the machine tool industry, and has also become an important factor hampering the company's performance. The prospects for the CNC machine tool industry are still promising. In 2010, the production rate of metal cutting machine tools in China was 33.1%, while the growth rate of CNC machine tools was as high as 66.7%. The growth rate of the company's CNC machine tools is 57.8%, which is higher than that of ordinary machine tools, which is in line with the development of the industry. At the same time, the gross margin of CNC machine tools is higher than that of ordinary machine tools. The company's product structure adjustments are progressing gradually. In 2010, the company launched five new categories of products, marking the beginning of product restructuring. The company will gradually increase the share of CNC machine tools, ordinary machine tools with lower gross margins will transfer OEM outsourcing, and the target growth rate for the five new categories of products in 2011 is over 40%. After the completion of the company's heavy machine tool and vertical machining center project, the production capacity of CNC machine tools will be greatly increased. Company profit forecast: The company's EPS for 2011-2013 is expected to be 0.31, 0.47, and 0.58 yuan respectively, and the corresponding price-earnings ratio is 44.7, 29.2, and 23.7 times, and the short-term valuation is reasonable; considering the company is a leading enterprise in the industry, a carefully recommended investment rating is given.