Incidents: The company released its 2011 annual report on March 9. Total operating income was 2.182 billion yuan, down 27.83% year on year; operating profit was 542 million yuan, down 1.67% year on year; and net profit attributable to shareholders of listed companies was 347 million yuan, down 0.76% year on year. Among them, revenue for the fourth quarter was 424 million yuan, down 50.25% year on year, up 21.73% month on month; net profit attributable to listed companies was 127 million yuan, up 28.21% year on year, up 49.64% month on month. EPS = 0.49 yuan, and EPS for the fourth quarter = 0.18 yuan, slightly higher than our previous expectations. Comment: Main financial indicators: The company's revenue for the fourth quarter was 424 million yuan, in line with our previous expectations. The gross profit margin was 65.65%, a sharp increase of 38 percentage points from last year, 17 percentage points back from the third quarter, and 16 percentage points higher than our forecast. In the fourth quarter, the company's three-item expense ratio was 20.56%, up 12 percentage points from the previous year and 9 percentage points from the previous month. The number of inventory turnover days was 46 days, up 35 days from the same period last year, and down 14 days from the third quarter. The change in business model is the reason for the decline in revenue and the increase in gross margin in the fourth quarter: in 2011, the company's feed processing business began to shift to incoming material processing, which was particularly evident in the fourth quarter. Since revenue from incoming material processing excludes raw materials and only processing fees, as reflected in financial data, it is reflected in financial data that revenue has declined sharply year over year, and gross margin has increased dramatically. At the same time, the month-on-month increase in revenue was due to the increase in small to medium size orders. Preliminary completion of industrial integration in 2011: In October 2011, Huaying Technology completed a 20% equity acquisition of Huaying Optoelectronics. Huaying Optoelectronics has completely terminated the CRT business and transformed the one-stop touch business. In addition to Huaying Technology's small to medium LCD modules and upstream touch screen display materials (incorporated in August 2011, ColiVision, the company holds 82.8% of the shares, specializes in flat panel display devices and touch component materials), the company is gradually forming a strategic layout based on LCD modules, which combine touch components, touch components, and integrated touch control products (including sensors, cover lens, touch screen modules, and LCM modules). It is not only Huaying that has a one-stop touch layout; major **** manufacturers such as TPK and Shenghua are actively expanding, and industrial chain integration has gradually become a trend in the touch screen industry. Touch screens are the driving force for the company's growth this year: this year, the company will continue to promote investment in upstream display materials for touch screens, and further acquire Huaying Optoelectronics in due course to achieve shareholding. The LCD panel industry is expected to improve this year compared to last year. Referring to the traditional LCM module business in the fourth quarter of 2011, we estimate annual revenue of about 1.6 billion dollars. As for the new business, we expect Collivision to start production in the second half of the year and contribute part of the revenue, but the net profit contribution is limited. However, Huaying Optoelectronics's one-stop touch screen production only began in the 3rd quarter of last year, and production capacity is still continuing to expand. We expect this year's revenue to be about 3 times that of last year. Using Huaying Optoelectronics in 2011 to contribute 8.6 million in investment income to the company, it is estimated that Huaying Optoelectronics's revenue last year was about 3-4 billion yuan. Assuming that Huaying Optoelectronics is merged, a preliminary estimate is that the touch screen related business will contribute about 1.3 billion dollars in revenue. Profit Forecast and Investment Rating: This is a year where the company's strategic layout is beginning to bear fruit. Part of the traditional LCM business has been changed to a small to medium size, and the new business touch control is progressing steadily. The biggest increase this year is expected to come from touch screens. Assuming 1) the successful acquisition of Huaying Optoelectronics, the shareholding ratio reaches 75%; 2) the capital required for the acquisition comes from loans and own capital. We gave the company profit forecasts of 0.71, 1.02, and 1.36 yuan per share from 2012 to 2014, maintaining the company's “recommended” rating. Risk warning: 1) There is some uncertainty about whether and when the further acquisition of Huaying Optoelectronics's shares will be realized. 2) Demand in the touch screen industry falls short of expectations.