The company is mainly engaged in the production and sale of carbon black and electricity. It is one of the leaders in the carbon black industry. It produces 300,000 tons of carbon black per year, has an operating rate of 100%, and ranks among the top three in the country. Production capacity will continue to grow in the next few years. In the third quarter of 2011, the company achieved operating income of 1,549 billion yuan, a year-on-year increase of 65.35%; operating profit of 9.048,800 yuan, an increase of 36.09%; net profit attributable to owners of the parent company of 85.17,800 yuan, an increase of 68.96% year-on-year; and basic earnings per share of 0.2,657 yuan/share. Consolidated gross margin declined year over year. In the third quarter, the company's comprehensive gross profit margin was 18.65%, down 1.59 percentage points from the previous year. In the first half of the year, raw material prices were high, but since entering the second half of the year, there has been a downward trend; considering that raw material costs in the first three quarters are still higher than last year, labor costs have also increased this year. The ability to control expenses was improved during the period. In the third quarter, the company's expenses rate for the period was 11.7%, down 0.7 percentage points from the previous year. Among them, the sales expenses ratio was 5.69%, down 0.6 percentage points from the previous year; the management expenses ratio was 2.98%, up 0.16 percentage points from the previous year; and the financial expenses ratio was 2.78%, down 0.2 percentage points from the previous year. Due to the large amount of overfunded capital, the company's financial expenses will decrease in the future. At the same time, the scale effect is evident, and sales and management expenses will all drop. Centralized distribution of fund-raising projects. The carbon black production capacity of the headquarters reached 300,000 tons, supporting a 51 MW exhaust gas power generation project. Jiaozuo built a new 140,000 tons/year plant, which started production of 70,000 tons at the end of 2011 and 70,000 tons at the end of 2012. In a situation where the concentration of China's carbon black industry is low, and downstream demand is huge and concentrated, rapidly expanding production capacity will improve the company's supply volume and supply stability. This is essential for the carbon black industry where supply exceeds demand, so the company can maintain a 100% operating rate. In the future, along with an increase in industry concentration and an increase in gross margin, the company's performance will increase dramatically. Furthermore, the first phase of the white carbon black project, which was raised in the first half of the year, was built at the company headquarters. In the future, it will mainly target the tire market. The project will enhance the company's market response capacity and prevent the product situation that may be caused by the expansion of white carbon black's share, which is of great significance in securing the company's position in the industry. Maintain an increase in holdings rating. We expect the company's earnings per share for 2011-2013 to be 0.34 yuan, 0.42 yuan, and 0.54 yuan, respectively. Based on the closing price on October 18, 2011, the corresponding dynamic price-earnings ratios are 28 times, 22 times, and 17 times, respectively. Maintain an “increase in holdings” investment rating. Risk warning: Prices of raw materials have risen more than expected, and coal tar is downstream of coking. Steel production is greatly affected by coal prices.