Key points of investment: First coverage, rating for increasing holdings. EPS for 2015-17 is predicted to be 0.23, 0.83, and 1.24 yuan, respectively, with a compound growth rate of 109%. Referring to the valuation levels of 6 comparable companies in the railway equipment industry, considering the company's room for future localization of high-speed rail brake pads and overseas expansion, the comparable company was given an average PE of 31 times that of 2016, corresponding to a target price of 25.73 yuan, for the first time coverage, and an increase in holdings rating. The company's main business bottomed out and rebounded, and the high-speed rail brake pad business is expected to contribute new performance growth points. We believe that the company will optimize its product structure, use the Korean R&D center to actively explore high-end overseas markets, effectively implement cost reduction and efficiency, and achieve restorative growth in diamond tools and other businesses. On the other hand, the company will accelerate the industrialization of high-speed rail brake pad projects, strive to form product sales in 2016, and create new performance growth points for the company's performance. The gross margin of export products is significantly higher than that of domestic products, and overseas markets will be used to enhance the profitability of the main business. The company has R&D and manufacturing bases in Thailand and Canada, and has two sales subsidiaries in the US. The overseas sales network has basically taken shape. In the future, it will further increase its overseas market share by meeting the individual needs of overseas customers. The company plans to set up a diamond tool research and development center in South Korea, use local talents and technical advantages to complete product upgrades, and increase its share in the high-end diamond tool market in Europe and the US. The market for high-speed rail brakes is expected to exceed 8 billion in the next two years, and high-speed rail brake pads will blossom brightly. China's EMU ownership is on the rise. In 2014, the number of EMUs owned reached the 1,709 standard. It is expected that by 2015, China's EMU ownership will reach the 2164 standard list. Considering the price reduction factors brought about by localization, it is estimated that the total domestic market size of high-speed rail brake pads will reach about 8 billion yuan in 2015. Currently, this market still mainly relies on imports, and there is plenty of room for localized replacement of high-speed rail brake pads. Risk warning: brake pad business development risk; overseas market risk.