In January-September, the company achieved total operating income of 626 million yuan, an increase of 3.23%; total profit of 40.2 million yuan, a year-on-year decrease of 8.09%; net profit attributable to the parent company of 31.05 million yuan, a year-on-year decrease of 16.62%; and basic earnings per share of 0.08 yuan. The year-on-year changes in total revenue, total profit, and net profit for the 3rd quarter were -1.01%, -7.82%, and -4.50%, respectively, with basic earnings of 0.03 yuan per share. The company expects net profit attributable to owners of the parent company to change less than 30% in 2008 compared to the previous year. Product sales fell short of expectations: (1) The company is mainly engaged in the production and sale of construction ceramic products such as high-end tiles. The main production bases and markets were in the south. The freezing, earthquake and floods in the south had a big impact on the company's production and sales during the year. Coupled with the decline in the real estate market, the company's product sales fell short of market expectations, and revenue increased slightly. (2) The reasons for the increase in the company's operating income and the decrease in net profit are: ① the end of the preferential income tax rate reduction period for the holding subsidiary Shanghai Smick Ceramics Co., Ltd. and the year-on-year decrease in the amount of taxable income added to technology development expenses this year, resulting in an increase in the actual tax burden ratio from 11.43% to 18.68%; ② the cost rate also increased by 2.22 percentage points to 27.85% during the period. Gross margin has been rising steadily: The company's current products are positioned as high-end brands and have strong bargaining power in the downstream market. Against the backdrop of rising raw material prices, increased transportation costs and human capital, and shrinking demand, the overall gross margin maintained a steady upward trend. It increased 2.39 percentage points to 35.01% year-on-year during the reporting period. The market concentration of high-end architectural ceramics is high. In recent years, the company's market share is in the top three, and the market control is strong. After the new production capacity is put into operation, it has advantages in scale and cost, so there will not be much room for future gross margin reduction. Company highlights: (1) Rapid expansion of production capacity: 3 of the 6 medium and high-end ceramic tile production lines that the company raised capital to invest in are about to be put into production, and the other 3 are in the installation, commissioning and trial production and commissioning stages. When the project was put into operation, the output was 25% of the design capacity, and production was achieved at full capacity the following year. At that time, the production capacity of vitrified tiles will double from the original 900 square meters, and the production capacity of glazed tiles will increase from 250 square meters to 850 square meters. (2) The company Smick Tiles has a strong leadership position in the high-end market. It is now entering the mid-range ceramic tile market with a wider market capacity and greater potential for sales growth, consolidating its market position and strengthening its core competitiveness. Profit forecast and rating: Based on the assumption of a decline in demand growth, the company's EPS was lowered to 0.11 yuan, 0.08 yuan, and 0.16 yuan in 08-10, corresponding to dynamic price-earnings ratios of 36 times, 46 times, and 24 times; the valuation was too high, maintaining a “neutral” rating. Risk warning: the real estate industry's boom continues to decline, the risk of demand for the company's products; the risk of high energy prices operating.