Report summary: Performance was slightly lower than expected, and gross margin increased steadily. In 2011, the company achieved operating income of 962 million yuan, up 17.28% year on year; operating profit of 148 million yuan, up 23.00% year on year; net profit attributable to shareholders of listed companies was 118 million yuan, up 11.67% year on year; and completely diluted EPS of 0.51 yuan, slightly lower than our original performance forecast of 0.56 yuan. The comprehensive gross margin of the company's products was 34.87%, an increase of 1.46 percentage points over the previous year. There are three reasons why the performance fell short of expectations: first, the sales revenue of industrial supporting paper fell short of expectations; second, the increase in investment in R&D expenses led to a 1.37 percentage point increase in the management expenses rate; and third, the income tax rate increased. The oligopoly position in the field of electrolytic capacitor paper is stable, and it has entered the high-end field. The company's electrolytic capacitor paper products have a monopoly position in China, and the market share is second in the world, second only to the biggest competitor, Japan's NKK. Part of the additional capital raised by the company was used for technological reform of electrolytic capacitor paper, mainly producing ultra-low loss products, and rapidly entering the high-end market. Fund-raising projects expand production capacity, and performance contributions are worth looking forward to. The domestic specialty paper industry achieved steady growth, and the average annual growth rate of specialty paper and board production from 2000 to 2010 was 11.61%. The company is actively promoting the construction of fund-raising projects, strengthening technological transformation, and expanding the production capacity of specialty paper. The electrical paper production line will be put into operation by the end of 2012, and the consumer filter paper production line will be put into operation by the end of 2013. Product sales will directly benefit from the increase in consumption and improve the company's product structure. Performance contributions are worth looking forward to. Profit forecasting and valuation. Affected by the downturn in the downstream industry, we lowered our performance expectations slightly and predicted that the company's diluted EPS for 2012-2014 would be 0.71 yuan, 1.07 yuan, and 1.54 yuan respectively. Based on a price-earnings ratio of 25 times 2012, the target price for the next 6 months is 18 yuan, maintaining the “buy” rating.