The provision for price decline led to a sharp decline in net profit. In 2013, the company's operating income was 2.324 billion yuan, up 10.4%. The net profit belonging to the parent company was 39.25 million yuan, down 46.8%, corresponding to EPS0.14 yuan. Due to the decline in performance due to the provision of high-priced raw materials, the loss of inventory price increased by 40.24 million yuan, and the conversion of projects under construction led to an increase of 22.54 million yuan in depreciation.

The traditional engine business has remained stable, and the revenue of the large engine project has exceeded 100 million yuan. In 2013, the company's engine business income was 1.56 billion yuan, an increase of 9.73% over the same period last year. Revenue from generator sets and accessories increased by 5.8% and 23%. According to estimates, the sales revenue of MAN high-power medium-speed diesel engines is about 127 million yuan, a sharp increase of nearly twice as much as the same period last year. The business income of traditional engines, generator sets and accessories is about 2.2 billion yuan, an increase of 4.5% over the same period last year.

Orders for high-power medium-speed diesel engines are growing rapidly and are expected to break even in 2014. The company received 448 million yuan in new orders in 2013 and only 111 million yuan in 2012. By the end of the year, the hand-held order is 390 million yuan, and the order delivery period is usually 8-12 months. Considering the newly signed order in 2014, the machine revenue is expected to reach 430 million yuan in 2014, which is expected to break even or make a small profit. We expect that the construction of law enforcement official ships, marine auxiliary ships, engineering ships and ocean-going ships will drive the rapid growth of orders for large machines in 2014, and the new orders for large engine projects are expected to reach 800 million yuan.

The level of gross profit margin increased slightly and the expense rate increased significantly during the period. The comprehensive gross profit margin was 12.2%, up 0.7% from the same period last year, while the operating profit margin and net profit margin were 1.7%, down 2.1% and 1.8%. Among them, the gross profit margin in the fourth quarter was 16%, mainly due to an increase in sales of 200 models with higher gross profit margin, high-power medium-speed machines began to deliver 13-year orders, gross profit margin improved compared with the same period last year, and gross profit margin of generator units increased by 2.2 percentage points.

Maintain the "buy-A" rating. It is estimated that the company's net profit from 2014 to 2016 is 109 million yuan, 158 million yuan and 202 million yuan, corresponding to EPS0.40 yuan, 0.57 yuan and 0.73 yuan. The company has 370 million yuan in cash and has a strong margin of safety. As a listed company under the State-owned assets Supervision and Administration Commission of Shandong Province, it is expected to benefit from the acceleration of state-owned assets reform and maintain the "buy-A" rating. Corresponding to 25 times the dynamic PE in 2014.

Risk hint. The delivery schedule of mainframe orders is lower than expected; the risk of rising prices of raw materials; the risk of projects under construction turning into fixed assets and the risk of increased depreciation expenses.