The need for a change in valuation models is an important basis for our rating increase. On July 2, the company announced that FAW Group will hold 47.73% of the company's shares and inject it into FAW shares as an investment. It is more likely that FAW will absorb and merge FAW Xiali. In the absence of absorption and merger, FAW-Xiali's valuation according to EPS multiplied by appropriate PE is relatively appropriate; in the case of relatively certain mergers and acquisitions, we believe that the real value of the enterprise cannot be fully reflected due to the PE valuation model. In the case of group absorption and merger, the real value of the enterprise should be reflected relatively reasonably by Toyota's equity plus Xiali's net assets, and this valuation model can be fully reflected after the entire group is listed. FAW Toyota's assets are of high quality, and Xiali is conservatively estimated. FAW Toyota, which has a 30% stake, has strong profitability and is the most competitive Japanese joint venture brand in the country. We believe that FAW Toyota's PE in 2010 should be 12-15 times, and according to conservative estimates of 13 times, FAW Toyota's market value of 18 billion yuan is quite reasonable. The Charley headquarters gave a 1.5 times conservative PB. According to 2010 data, the estimated market value should be 5.5 billion. To balance the interests of major shareholders, a cash option plan may be adopted. Tianqi Group holds 28.8% of Xiali's shares, and the interests of the second largest shareholder will be the main consideration of FAW shares. Since there is still 23.5% of public equity, referring to GAC Changfeng's model, we think the secondary cash option method is more appropriate. Raise the investment rating to “Highly Recommended - A”: It is expected that the auto market will improve in the second half of the year, the pressure on raw material costs will ease, and the headquarters will reduce losses slightly; Toyota's resumption of production will drive an increase in investment income in the second half of the year. The estimated earnings per share are 0.09 yuan in '11 and 0.35 yuan in '12. The PE and PB corresponding to '11 are 84 and 3.3, respectively. We are optimistic about the revaluation brought about by the FAW-Group's overall listing, and raised the investment rating to “Highly Recommended - A”. Risk warning: Credit is tight, CPI is still high, and FAW Group's overall listing process is slow.