Revenue increased by 1.3% in 2009, net profit decreased by 1.3%. In 2009, Dongli Transmission achieved operating income of 534 million yuan, YOY increased 1.3%, achieved net profit attributable to the parent company of 82,319,600 yuan, and YOY decreased by 1.3%. Based on the dilution of share capital at the end of the year, the EPS is 0.46 yuan/share, the net cash flow from operating activities per share is 0.38 yuan/share, and the plan is to distribute 1 yuan for every 10 shares (tax included). Negative growth in main business revenue and sharp increases in depreciation reduced profitability. In 2009, Dongli Transmission's main business profit increased by only 0.5% year on year. At the same time, the increase in bad debt preparations and the decline in government subsidy revenue became the main reason for the negative increase in net profit. Judging from the company's annual report, the main reason for the slow profit growth of the main business is the weak growth in sales revenue of the main products, which showed a negative increase of 0.5% over the previous year. At the same time, the decline in product prices and the exponential increase in depreciation brought about by the commencement of fund-raising projects in the fourth quarter also reduced the gross profit margin, thus leading to a decline in the profitability of the company's main business throughout the year. Product gross profit has declined almost across the board, and the product structure still needs to be adjusted. The gross margin of Dongli Transmission in 2009 was 32.9%, down 1.5 percentage points from 2008. In addition to the 0.5 percentage point increase in gross margin of modular speed reduction motors, the gross margin of other major products declined. Among them, the gross margin of heavy-duty gearboxes fell 1.3 percentage points, and sales of small speed reducers fell by 80%, and gross margin dropped sharply by 12.1 percentage points. Although the sales volume of the new modular high-precision reducer is growing rapidly, the sales scale and product gross margin in 2009 are still lower than the revenue scale and profit level of the small speed reducer in 2008, so the improvement in the company's profit level will mainly depend on further adjustments in the product structure. The company's profit in the fourth quarter fell 53% year on year due to the conversion of projects under construction to fixed assets. In the fourth quarter, Dongli Transmission transferred nearly 400 million projects under construction to fixed assets, resulting in a 112% increase in fixed asset balance, while product sales increased by only 3.7% during the same period. Therefore, the increase in depreciation by 2 times directly reduced gross margin in the fourth quarter by 6 percentage points. At the same time, product costs rose, leading to a 94.6% decline in gross profit in the fourth quarter. Although the company has implemented excellent cost control, and sales and management expenses have dropped significantly by 16.5% year over year, profit from the main business still decreased by 57%. The company's net profit for the fourth quarter fell 53% year on year, and earnings per share were only 5 cents. Industry demand continues to improve, and the company's competitive advantage is still obvious. Currently, the output of the steel industry, which is the company's main downstream industry, continues to rise, which will increase demand for speed reducers. At the same time, a sharp rise in iron ore prices will also weaken the profitability of steel mills. Therefore, in the case of volume increases and profits decline, steel mills should seek more cost-effective domestic equipment to replace imports and reduce costs. Therefore, as far as Dongli Transmission is concerned, industry demand will continue to improve. In 2009, Dongli Transmission not only completed the adjustment of the production layout and amortization of a large amount of one-time costs, greatly increasing production capacity, but also completed the production of a new product - a 1.5 megawatt wind power gearbox prototype. High-speed locomotive gears also entered the industrialization stage, showing that the company's competitive advantage is still obvious, so there is a possibility of rapid improvement in performance. Investment ratings Although Dongli Transmission's 2009 performance declined by 1.3%, the company's production capacity has increased dramatically, and the development of new products is progressing smoothly. Therefore, in a situation where domestic product demand may improve, power transmission performance is also expected to improve quite significantly. It is expected that the 2010 and 2011 EPS will reach 0.5 and 0.66 yuan/share, respectively, and the relative valuation corresponding to 2010 EPS is 37 times, giving it a “prudent recommendation” investment rating.