The sales situation improved greatly in the fourth quarter, and performance is expected to break out of the trough. Since the company's models are economical independent brands, during the overall downturn in the industry in the third quarter, the decline in the company's sales exceeded the average level of the car industry. However, after the industry situation rose again in the fourth quarter, the company's sales greatly surpassed the industry, and the company's sales volume in the fourth quarter increased by more than 67% over the third quarter. Meanwhile, after the fourth quarter, sales volume of Tianjin FAW and Toyota was also higher than that of the industry. Falling prices and rising steel prices are eroding the profitability of the headquarters. The price of the company's products is relatively low. Among them, the average price of the Xiali series is 30,000 to 50,000, and the average price of the Wei series is 50,000 to 80,000. They are all very sensitive to prices and steel prices. The industry was at a low point in the third quarter, and the company cut prices significantly. Meanwhile, since the third quarter, as the inflation situation has become more severe, the company's various costs have also been rising, so the company's profitability will not improve significantly in the near future. The increase in scale and the upward model structure contributed to the headquarters's profit and loss balance. At present, China's economy mini car industry is still in the profit stage of low profit and excessive sales. Therefore, for the company headquarters, expanding the scale of production while striving to improve the model structure is the main means of changing the current losses of the headquarters. Over the past two years, the company has been in the large-scale fixed asset construction stage (Figure 2), Huali Plant, TA Engine and other projects. Although they put some pressure on profits in the short term, they are still the only way for the company to improve its profitability in the medium to long term. The increase in the ratio of the company's own engines next year will increase the company's profitability and reflect the company's early work. At the same time, the company is actively developing A-class sedan models to improve the company's model structure. FAW Toyota will also break out of the trough in the fourth quarter. Affected by Toyota's numerous recalls, the sales growth rate of FAW Toyota in the first three quarters of this year was slightly lackluster compared to traditional rivals such as GM, VW, and Nissan. However, since the fourth quarter, sales of FAW-Toyota's various models began to improve. In December, sales of the RAV4 and Corolla models gradually approached the level of 10,000 and 20,000 units, and the new Reeds also reached around 8,000. Driven by these few best-selling models, FAW-Toyota's fourth quarter results may well exceed expectations. Investment strategies. We expect the company's revenue to increase 8% and 10% year-on-year in the year 10 and 11, corresponding to EPS of 0.34 and 0.45 yuan. Currently, the company's stock price corresponding to dynamic PE is 25 and 20 times, respectively. Although the current valuation of the company is slightly higher than the industry level, considering that the company's performance is still gradually recovering and the valuation premium brought about by the FAW Group's listing, we continue to maintain the company's “increased holdings” rating.