Production and processing are two-wheel drive, and development strategies are beginning to take shape. The company is positioned as an international advanced manufacturer of large and heavy CNC machine tools, and is also actively entering the processing fields of large-scale precision forging and casting parts such as electricity, ships, nuclear power, and mining machinery with a wider market space. The development strategy is becoming increasingly clear. Large parts processing is a scarce industry in China. Take the processing center built by Shanghai Electric Group with an investment of 1.4 billion yuan, as an example. Currently, orders over 3 years have reached 100 billion yuan, and market supply is in short supply. The company uses processing business as its main growth point in the future. It is less affected by macroeconomics, and the growth rate will be much higher than that of the general machine tool industry. Steady growth will be maintained next year. The market is worried that high-speed rail orders will decline next year, and the company's performance will grow negatively next year. We believe that although next year's high-speed rail orders may fall from 300 million yuan to around 150 million yuan, growth of 11% will be maintained next year. Sources include: 1. Revenue from large-scale CNC gantry machine tools will increase by more than 100 million yuan; 2. Ordinary machine tool orders will increase by more than 80 million yuan; 3. IPO production capacity will be invested in CNC round grinders, and roller grinder revenue will increase by more than 50 million yuan; 4. Parallel motion machine tools and processing business will begin to contribute revenue. The processing business was the main source of growth in 2011. The company plans to publicly issue no more than 35 million shares, raise 350 million yuan, and invest in the “CNC Large Machine Tool Technology Transformation Project”, and cooperate with Germany's Heath Zhuangming to manufacture a CNC gantry mobile boring, milling and turning center representing the international advanced level, a φ320 CNC floor boring and milling machine, and a 16-meter CNC six-axis gear hobbing machine. If things go well, it is expected that additional distribution will be completed in the first quarter of next year. The company has established a joint venture with Heath Zhuangming to establish East China Heavy Industries. The company holds 75% of the shares, has a total investment of 600 million yuan, and covers an area of 500 acres. It mainly undertakes the production and processing of large-scale, precision parts in the nuclear power industry and other fields at home and abroad. We expect that Huadong Heavy Industries may begin trial production in the third quarter of 2010, and the gross margin of the processing business may be as high as 50%. The joint venture cooperation project is conducive to the company's R&D and manufacturing technology reaching a world-class level, and subsequent profitability and high growth are worthy of long-term optimism. Maintain the “Overweight” rating. We maintain our profit forecasts of 0.95 yuan, 1.05 yuan, and 1.51 yuan from 2009 to 2011, and achieve rapid growth of more than 30% in the next two years, with reasonable short-term valuations. As a high-end CNC machine tool manufacturer benefiting from the construction of high-speed rail, wind power, and nuclear power, the company's product structure is continuously optimized and upgraded. Actively entering the parts processing business will gain broad development space. Next year, it will be at an inflection point in performance growth. We are optimistic about the company's medium- to long-term growth and maintain the “increased holding” rating.