In 2013, revenue increased by 34.1% year-on-year, while net profit fell 14.3% year-on-year:

The company reported that revenue rose 34.1% to 953 million from the 35000-ton IPO fundraising program put into production in 2012, including wine and water utensils up 25.2% to 576 million, and tableware up 60.9% to 233 million. Net profit in 2013 fell 14.3% year-on-year to 80.11 million, equivalent to 20 yuan in EPS.

The gross profit margin fell 1.4 percentage points year-on-year, and the expense rate rose 2.4 percentage points year-on-year:

In 2013, the company's gross profit margin was 28.0%, down 1.4% from the same period last year. The decline in profitability mainly comes from two aspects. First, social catering is restricted by "three public" consumption, and the economy is declining. Social catering is the largest downstream user of glassware. This has led to intensified competition in the glassware industry. Second, soda ash and natural gas together account for nearly 50% of glassware production costs. Last year, natural gas prices rose due to natural gas changes and soda ash prices bottomed out, resulting in higher production costs.

We judge that the company's profitability this year is expected to maintain a relatively stable situation, on the one hand, the more profitable Chuzhou crystal wine glass project will boost the overall gross profit margin, on the other hand, in the industry discount promotion environment, the company will reduce the weight of products and strengthen cost control.

In 2013, the company's expense rate increased by 2.4% compared with the same period last year, of which the sales expense rate rose 1% to 5.7% due to the construction of the national KA system. In 2013, due to the national KA system, the one-time investment is relatively large, and the sales expense rate will decline this year. Due to the increase in labor costs and increased investment in research and development, the management cost increased by 0.6% to 10.7%.

Adapt to the environment of transformation and actively pay attention to the emerging formats:

Affected by the decline in the main business, the company is prepared to actively pay attention to emerging formats and seek transformation and upgrading in 2014. Yu Le, the former financial manager of the company, was changed to the director of strategic operations of the company, and the company promised to complete technical cooperation with our company in Japan, establish an e-commerce platform and complete mergers and acquisitions of no less than one company in 2014. Transformation and upgrading will help the company to raise its valuation level.

Transformation and upgrading help the market capitalization open up the imagination and maintain the "buy" rating:

We estimate that the EPS from 2014 to 2015 will be 0.39 yuan and 0.55 yuan, and the current stock price will be 38 and 27 times corresponding to PE. 2014 is a big year for the company to seek transformation and upgrading. Judging from the current trend of transformation and upgrading of the light industry sector, the company is expected to enter emerging industries through extension. Although the company's current valuation is not cheap, but the transformation and upgrading will completely open up the market capitalization imagination and maintain the "buy" rating.

Risk hint: the competition situation of the main business is intensified.