In the first quarter of 2011, the company achieved operating income of 794 million yuan, an increase of 47.5% over the previous year; operating profit of 57.79 million yuan, an increase of 34.5% over the previous year; and realized net profit attributable to owners of the parent company of 45.18 million yuan, an increase of 36.2% over the previous year, and fully diluted earnings per share of 0.115 yuan. The industry is picking up, and profitability has increased dramatically. The company's main business is packaging base paper, carton board, and white-faced cow cardboard. With the gradual recovery of the macroeconomy, the prosperity of box board paper increased dramatically. During the reporting period, the company put into operation 200,000 tons of white-faced cow cards and 50,000 tons of technical improvement projects, driving the company's revenue to increase by 47.5% year on year; the company's consolidated gross margin fell 2.7 percentage points to 16.4% year on year. The year-on-year decline in gross margin was affected by the base effect. The price of waste paper was at a relatively low level in the first quarter of 2010, and the company raised prices for some products in the first quarter. We judge the second quarter of '11. Gross margin is expected to increase; with the gradual commissioning of new production capacity, the scale effect also reduced the period expense ratio. During the reporting period, the company's period expense ratio fell 1.7 percentage points to 9.3% year on year. Future highlights. 1. The company's capital raising project, 200,000 ton white kraft paper production line and 50,000 ton technical transformation project, were put into operation in October 2010 and will contribute significantly to profits in 2011. After the completion of this technical reform, the production line's stand-alone annual production capacity will reach 250,000 tons, and can achieve stand-alone production of multiple paper types. The company can adjust the product structure in a timely manner according to market demand; 2. In August 2010, the company announced that it plans to issue no more than 160 million shares in non-public shares, raising no more than 950 million yuan in capital for a green environmentally friendly recycled household paper project with an annual output of 68,000 tons. Stock price catalyst. 1. The packaging board sector is picking up overall, and the level of prosperity has increased. 2. The country's elimination of the country's backward production capacity for papermaking is nearly 1/3 of boxboard paper, and industry supply and demand are expected to improve further; 3. Expectations of RMB appreciation persist for a long time, constituting long-term benefits for the industry; 4. Zhejiang Sharp Ace Pharmaceutical Co., Ltd., the company's shareholding subsidiary, has entered a listing consultation period, with a shareholding ratio of 20%. The listing of participating companies is expected to become a catalyst for stock prices. Profit forecasts and investment ratings. The company's 2011-2012 EPS is expected to be 0.48 yuan and 0.52 yuan respectively. Based on the closing price of 7.66 yuan on April 26, the corresponding dynamic PE is 16 times and 15 times, respectively. There is a certain advantage in valuation, and the industry will maintain a high level of prosperity. We maintain the company's “increased holdings” investment rating. Risk warning. 1. Market development is slower than expected; 2. Drastic fluctuations in raw material prices have had a negative impact on the company's normal operations.