1. With the recovery of the large and medium customer markets, the company's sales volume started in June and entered a good situation. The company mainly produces the B, R, and M series of eddy-current retarders, focusing on the 8-12 meter bus market. In the first half of 2009, the large and medium customer market became one of the worst performing market segments. Sales volume fell 23.42% year on year, causing the company's average monthly sales volume of electric vortex retarders to 1,000 units in the 1st to 2nd quarter, with the lowest monthly sales volume of only 300 units. Since June, there has been a marked recovery in the large and medium customer market. The company's monthly sales volume in June exceeded 2,000 units, while the average monthly sales volume in the third quarter reached 2500-3,000 units. According to past experience, the fourth quarter is the peak season for the bus market. It is conservatively estimated that the company's sales volume in the fourth quarter will be the same as in the third quarter, and the annual sales volume is expected to exceed 20,000 units, reaching a record high. 2. The non-bus market is difficult to open, limiting the company's room for future growth. Currently, the electric eddy current retarder is mainly used for large and medium buses. In 2008, the domestic sales volume was about 40,000 units, of which the company sold more than 16,000 units, with a market share of about 40%. The company's biggest competitor, Tailoma France, sold 6,000-7,000 units, with a market share of nearly 20%. The company has long been committed to developing the vast medium and heavy truck market and special vehicle market, but progress has been slow. We believe that the company has substantial obstacles to the development of the truck market. On the one hand, the price of trucks is low, and the nearly 20,000 yuan electric vortex retarder accounts for almost 10% of the cost of trucks, making it difficult for OEMs to accept; on the other hand, most truck users are private logistics, have low safety awareness, high price sensitivity, and no power for installation. Furthermore, retarders for the truck market are not perfect in terms of compatibility and performance, and high failure rates lead to high usage costs. Without relevant policy support, the road to application and popularization of retarders in the truck field will be quite long in the short term. Taiwan-related Policies are unlikely. On the company side, the current development of the truck market is mainly the modification of large-tonnage transport vehicles in large-scale mining resource extraction sites. The sales volume is relatively small, with an annual sales volume of about 100 units. In 2008, sales of large and medium trucks were 36,400 units and 42,900 units respectively, while sales of heavy trucks and medium trucks were 107,600 units and 129,800 units respectively. The latter's market capacity was three times that of the former, and failure to open up the truck market would greatly limit the company's future growth potential. 3. Bargaining power is low, and there is a risk that gross margin will fall in 2010. The company's bargaining power is poor, and the right to price products is mainly controlled by bus OEMs. When raw material prices fall, there is some pressure on the company to reduce prices. This year, product prices drop by about 5%. When raw material prices rise, it is difficult to raise product prices. We expect that the prices of the company's main raw materials, copper and steel structural castings, will rise next year, and the company's gross margin is at risk of falling. In the first three quarters of 2009, the company's gross margin was as high as 41.2%, an increase of 6.7 percentage points over the previous year. 4. Profit forecast. The company's 2009-2011 EPS is expected to be 0.37 yuan, 0.42 yuan, and 0.50 yuan respectively, and the closing price on October 23 is 10.61 yuan, and the corresponding dynamic PE is 29 times, 25 times, and 21 times respectively. Considering the clear recovery trend in the large and medium customer markets, the company's “increased holdings” rating is maintained for the time being. 5. Risk warning. The main risks faced by the company include: 1) the risk that the company's bargaining power is low and the gross margin will decrease due to rising raw material prices; 2) the risk that demand will decline due to a slowdown in the growth rate of the bus market.