Incident: The company announced that executives have increased their holdings of 1.15 million shares in the secondary market and will continue to increase their holdings, cumulatively no more than 2% of the total share capital. Comment: The company is a leader in the coupling industry, with a domestic market share of over 20%. The company's main products: universal couplings, drum-shaped gear couplings, cutting blades, precision rollers, composite skateboards, automobile transmission shafts, etc. Among them, universal couplings, drum-shaped gear couplings, and shearing blades are the company's main products, accounting for more than 80% of total revenue. The company is a leader in the domestic coupling industry, with a market share of more than 20% in the industry. Judging from downstream distribution: steel accounts for 55% of demand for coupling products, and construction machinery accounts for about 30%. Customers include China Yizhong, Dalian Heavy Industries, Shanghai Heavy Industries, and Nanjing Gaogi. A coupling is a mechanical part used to connect two axes (active shaft and follower shaft) in different mechanisms so that they rotate together to transfer torque. In high-speed heavy-duty power transmission, some couplings also have the effect of cushioning, damping vibration, and improving the dynamic performance of the shaft system. The company's main customers include large enterprises such as Yizhong, Shougang, Angang Steel, Baogang, and Jigang in China. There is broad scope for importing and replacing high-end couplings: Foreign companies in the coupling industry include: German Voith Drive Technology Co., Ltd., Nakamura Zikou Co., Ltd., etc., and the main domestic companies include Tyre Heavy Industries, Deyang Lida Basic Parts Co., Ltd., Wuxi Universal Couplings (ordinary universal shafts and large universal shafts), and Kunshan Rongxing Power (universal couplings, drum-shaped gear couplings). The technical content of ordinary coupling products is low, there are many domestic manufacturers, and the phenomenon of product homogenization is serious. Competition is reflected in price and service, and domestic products occupy the vast majority of the market share. Currently, domestic manufacturers and foreign companies each account for half of the market share of mid-range products. High-end products, such as couplings used in cold-rolled plate and strip steel production lines, generally need to be imported in conjunction with foreign cold-rolled strip steel production lines. Due to technological progress and outstanding cost performance advantages, the market share of domestic enterprises is gradually expanding, and import substitution will be the company's main growth point in the future. The company invests in Jingtian Hydraulic, and its products are widely used: the company invests 90 million yuan and holds 5.22% of the shares in Anhui Jingtian Hydraulic Co., Ltd., which is currently the medium-sized manufacturing enterprise with the widest product portfolio, the longest product line, and the highest degree of product correlation in the field of hydraulic demolition in China. Therefore, the company is also an invisible robot manufacturer. If Shocking Hydraulic's dismantling robots are in high demand, the company is expected to continue to expand and strengthen the robot business sector. The main products of Jingtian Hydraulic include: 1. Hydraulic breakers (used for crushing in highways, construction, metallurgy and other industries); 2. Multifunctional demolition robots (used for demolition work in metallurgy, construction, nuclear energy, chemical, rescue and other industries); 3. Stationary hydraulic crushers (used in mining, metallurgical blockage treatment), etc. 1. Hydraulic breakers (used for crushing in highways, construction, metallurgy and other industries); 2. Multifunctional demolition robots (used for demolition work in metallurgy, construction, nuclear energy, chemical, rescue and other industries); 3. Stationary hydraulic crushers (used in mining, metallurgical blockage treatment), etc. Company strategy 2: lengthen the industrial chain and provide integrated equipment. The company continued to extend its production chain on the basis of traditional couplings and scissor blades, and developed new products with high gross margins such as rolls and skateboards. From 2011 to 2013, the gross margin of reels and skateboards rose to 43.1% and 55.8% respectively, and the revenue share rose to 3.6% and 1.3% respectively. Coils are mainly used in hot-rolled strip production lines such as hot continuous rolling and furnace coiling. A skateboard is an important product for use in rolling equipment in the metallurgical industry. It is installed on both sides of the rolling mill frame and the roller bearing seat. When the roller bearing seat slides on the frame, the skateboard protects the installation surface and guide. In 2013, the company issued convertible bonds to raise 320 million yuan for precision roll projects, cold-rolled universal shaft projects, and composite skateboard projects. As the fund-raising projects are put into operation, the share of high-margin products will rise further, raising the company's overall profit level. Executives continue to increase their voting interest in the company's shares, and the main business is expected to hit bottom and pick up: in 2013, the company's revenue was the lowest point in nearly 3 years, and net profit was the lowest point in 8 years. The company announced on March 5 that the company's executives have continued to increase their holdings in the secondary market, with a cumulative total of no more than 2%, indicating that they have great confidence in the company's future. Since the company's products are consumables with a certain degree of rigidity, there should be a certain rebound after a two-year slump, and the company's profit level will improve as the share of new products with high gross margin increases, so we predict that the company's 14-year performance will bottom out and rebound. Investment suggestions: Forecast that the company's EPS for 2014-2015 will reach 0.18 or 0.24 yuan, corresponding to PE 34 times and 29 times. For the first time, a “hyperholdings” rating was given. Risk warning: 1. Downstream steel production falls short of expectations due to macroeconomic downturn; 2. There is a risk that performance will fall short of expectations due to slow progress in the service market.