The company's net profit fell by nearly half during the reporting period. From January to June 2007, the company achieved operating income of 71.99 million yuan, a year-on-year decrease of 22%; operating profit of 18.81 million yuan, a year-on-year decrease of 50%; net profit of 13.79 million yuan, a year-on-year decrease of 45%; and diluted earnings per share of 0.056 yuan. The contraction of the core business — crude oil handling business — is the main reason for the sharp decline in the company's performance. The company's main business consists of the handling and storage of crude oil, refined oil products and liquid chemicals. The crude oil business revenue in 2006 accounted for about 70% of the main business revenue. Since Sinopec opened an oil pipeline from Changling to Yizheng at the end of May 2006, about half of the crude oil that was transferred through the company was replaced by an oil pipeline. The crude oil business achieved revenue of 44.76 million yuan during the reporting period, a year-on-year decrease of 35%, which is the main reason for the sharp decline in the company's performance. The increase in revenue in the liquid chemicals and refined oil products business did not increase profits. During the reporting period, the company achieved revenue of 19.35 million yuan from the liquid chemical business, an increase of 21% over the previous year, but due to a 54% increase in the cost of this business, gross profit was basically the same as the same period last year. The refined oil business achieved revenue of 6.48 million yuan, an increase of 2% year on year, but the cost of this business increased 29% year on year, leading to a 15% decrease in gross profit year over year. The container business has become a new growth point, and we are looking forward to further acquisitions of shares in Longtan Container Terminal after reaching the bottom of the valley. At the end of March 2007, the company completed the acquisition of 20% of the shares in Nanjing Port Longtan Container Terminal Company held by the parent company Nanjing Port Group. Its interest in the Longtan container was increased from 5% to 25%, while the interest in the Longtan container owned by the Nanjing Port Group was reduced from 50% to 30%. During the reporting period, Nanjing Port Longtan Container Terminal Company contributed 3.6 million yuan in investment income. As the largest inland river container port, Nanjing Port has good prospects for container business growth. With the current oil business shrinking, the company wants to break out of the trough and is looking forward to further acquisitions of Longtan container shares. Valuation and investment recommendations. The company's fully diluted EPS in 2007, 2008, and 2009 is expected to be 0.105 yuan, 0.124 yuan, and 0.138 yuan, respectively. The dynamic price-earnings ratio is 78, 66, and 59 times, respectively, which is far higher than the industry's valuation level. Due to the company's high valuation and insufficient growth, we maintain the company's “neutral” rating.