Net profit fell 42.4% in the first half of the year, and the results were in line with expectations. In the first half of the year, the company's revenue was 1,114 billion yuan, an increase of 0.58%; net profit was 32.1176 million yuan, a year-on-year decrease of 42.44%, corresponding to EPS of 0.12 yuan. The performance was in line with expectations. The traditional diesel engine business is growing steadily. In the first half of the year, orders for inland watercraft engines declined, and orders for pelagic fishing vessels increased markedly. The company's traditional diesel engine business was relatively stable. Revenue for the 160 and 170 series decreased by 30% and 15% respectively, while revenue from the 200 series increased by less than 10%. The company's diesel engine business revenue reached 746 million yuan, an increase of 0.8% over the previous year; generator set revenue was 215 million yuan, an increase of 13.18%. Orders for mainframe machines that have not been delivered last year and orders for the 1st quarter of '13 are concentrated on delivery in the second half of the year, and the revenue from the mainframe business is expected to exceed 100 million in '13. The surge in large aircraft orders may help next year's performance or usher in an inflection point. In the first half of the year, the company successfully achieved support in the field of business vessels, pelagic fishing vessels, and passenger roller vessels. New orders for large aircraft were 265.73 million yuan, of which 40.72 million yuan was ordered in the first quarter and 220 million yuan in the second quarter. By the end of June, the company had orders of 314.79 million yuan, and last year's orders were only 110 million yuan. Orders for large aircraft continued to increase in the second half of the year. In June, CNOOC also tendered 60 large aircraft for 15 offshore auxiliary vessels, and the company is expected to receive half of the orders. The company's order cycle is about 8 months, so most of this year's orders will be delivered next year, and the aircraft will reach an inflection point in performance. Depreciation of large machines has increased, raw material prices have risen, and comprehensive gross margin has declined. In the first half of the year, the company's overall gross profit margin was 11%, down 1.2 percentage points. The main reason was that the large engine project was still in a loss period, depreciation costs and labor costs, and the price of imported raw materials for large engines rose by 1.4 percentage points; the gross margin of the diesel engine business fell 1.4 percentage points; market development efforts increased, sales expenses increased by 38.9%, sales rates increased by 0.5 percentage points, and management rates increased by 0.7 percentage points. Upgraded the rating to “Buy-B”. We expect the company's net profit for 2013-2015 to be 91.4 million yuan, 147 million yuan, and 219 million yuan, corresponding EPS of 0.33 yuan, 0.53 yuan, and 0.79 yuan. Looking at the medium to long term, the company is in the process of starting a strategy. It is expected to reach an inflection point in performance in 2014, giving a 20-fold dynamic PE next year, with a target price of 10.60 yuan for 6 months, and raising the rating to “buy-B.” Risk warning. 1. Mass production of high-power medium-speed engine projects falls short of expectations; 2. Policy risks related to LNG marine engines. 3. Risk of increased depreciation affecting performance due to the transformation of casting and forging projects