Mass production of railway grinders was the main reason for the increase in the company's performance in 2009. In 2009, the company achieved revenue of 574 million yuan, a year-on-year increase of 36%; realized net profit attributable to shareholders of listed companies of 115 million yuan, an increase of 129% over the previous year; and earnings per share of 0.97 yuan. Affected by the economic crisis, the company's normal machine tool products, which were originally mainly exported, dropped significantly. Last year, production fell by about 40%, which is basically in line with the industry. The main reason for the increase in the company's revenue is the mass production of railway grinders and molds: the company undertook orders for railway grinders and molds reached 400 million yuan. In 2009, this part of the order achieved revenue of 300 million yuan, while the total revenue of the company's Longmen Machine Tool was only about 150 million yuan in 2008. 2010 will be an adjustment year: revenues are flat and profits are likely to fall. Judging from the high-speed rail construction process, tomorrow and the next two years will be the main year for the completion of high-speed railways. We believe that at that time, old machine tools can be reused, and there is less possibility of receiving new orders. Coupled with qualification requirements, most construction units have already purchased this product, so the volume of new orders this year will also be drastically reduced. It is expected that revenue for this product will drop by more than half this year. Judging from the situation in the machine tool industry, although there has been some recovery at present, downstream uncertainty and expectations of economic austerity may repeat the recovery process in the second half of the year. Therefore, we judge that the new demand brought about by the recovery of the machine tool industry will not be enough to make up for the decline in revenue from railway grinders this year. Considering that new products such as CNC cylindrical grinders, roller grinders, and large components began to contribute revenue this year, the company's annual revenue is not expected to change much from year to year. Since the gross margin of railway grinders exceeds 41%, the gross margin of trial production of new products is relatively low, so this year's product revenue structure changes will reduce the gross margin of the company's CNC machine tool products by about 2 percentage points. The company's performance in the first half of this year is expected to be relatively good. This is the opposite of last year. Therefore, although the full-year results have declined, it is expected that the year-on-year growth in the first half of this year will still be relatively rapid. The stock price was too high, and the rating was lowered to neutral B. We expect the company's earnings per share for the next three years to be 0.84 yuan, 1.22 yuan, and 1.87 yuan, respectively. Although companies starting next year will resume a growth rate of about 50% as new projects are put into operation, based on this year's PEG of 1, the corresponding stock price is around 42 yuan. We believe that the current stock price already reflects expectations for future growth quite well. If we consider the trough that may occur in the machine tool industry in the second half of the year, the current stock price is overvalued to a certain extent. We lowered its rating to neutral - B. The target price for 6 months is 36 yuan, which corresponds to a dynamic price-earnings ratio of 30 times in 2011.