The company achieved revenue of 834 million yuan in the first half of the year, an increase of 3.7% over the previous year. Net profit attributable to owners of the parent company was 76 million yuan, an increase of 6.5% over the previous year, corresponding to earnings of 0.14 yuan per share, which was slightly lower than expected. The company's gross margin for the first half of the year fell slightly by 0.6 percentage points from last year to 20.9%. Affected by falling coal prices, demand in the coal machinery industry declined, competition was fierce, and the impact on the company was obvious. Considering that the company has laid out a major customer strategy, new products such as coal mining machines and tunneling machines are being gradually promoted. In the long run, the company's layout will drive a gradual improvement in performance, but it is unlikely that results will be seen within this year. We expect the company's earnings per share in 2012 to be 0.28 yuan, giving 20 times the 2012 price-earnings ratio, lowering the target price to 5.60 yuan, and downgrading the rating to holding. Key points supporting ratings In the first half of the year, the company's transportation equipment revenue increased by 3.4%, and support equipment increased by 16.9%. Affected by increased competition, the gross margin of support equipment fell 2.2 percentage points to 14.8%. Also, since the company's coal mining machines and tunneling machines have just obtained coal safety certificates, the gross margin of the company's mining equipment is only 12%, so there is plenty of room for improvement. The company also predicts a 0-20% increase in net profit for January-September. The company's orders for this year are scheduled to be produced until the fourth quarter. Delivery of existing orders has been delayed, and repayment difficulties have been difficult since the fourth quarter of last year. The company's semi-annual report inventory of products increased by more than 100% compared to the beginning of the year, and accounts receivable increased by 30%, indicating that the impact of delayed order delivery is still fermenting. Pressure from within the industry and from policy sides is causing the coal industry to cut production and guarantee prices. The impact of low coal prices is gradually being transmitted upward along the industrial chain, and is expected to cause the already fiercely competitive coal machine industry to face even more severe adjustments. The main risks facing ratings are the risk of increased competition and the risk of a decline in fixed asset investment in the coal mining and washing industry. Valuation was affected by falling coal prices, demand in the coal machinery industry declined, competition was fierce, and the impact on the company was obvious. Considering that the company has laid out a major customer strategy, new products such as coal mining machines and tunneling machines are being gradually promoted. In the long run, the company's layout will drive a gradual improvement in performance, but it is unlikely that results will be seen within this year. We expect the company's earnings per share in 2012 to be 0.28 yuan, giving 20 times the 2012 price-earnings ratio. The target price will be lowered from 7.61 yuan to 5.60 yuan, and the rating will be downgraded to holding.