Matters: Deli Co., Ltd. released its 2013 quarterly report, achieving operating income of 180 million yuan, an increase of 40% over the previous year; net profit attributable to shareholders of listed companies of 300 million yuan, an increase of 149% over the previous year, and EPS of 0.08 yuan, in line with the forecast range of 140% to 170% year-on-year growth in the company's March performance forecast. The company expects the year-on-year growth rate of 1H13 ownership and shareholder net profit of listed companies to be 130% to 160%. Ping An's view: Continuation of high growth: 1Q13's performance continued high year-on-year growth over 12 years. Among the main driving factors, apart from deep channel exploration, technological transformation, and low raw material prices, the contribution of product upgrades was even more significant than in 2012. In terms of product structure upgrading, at this stage it is mainly a 35,000-ton high-grade glassware project. The project was officially put into operation in July '12 and achieved a net profit of 1.6 million in '12. The project is expected to contribute 50 million yuan in net profit for the full year of 2013 in the process of continuous improvement in production capacity utilization and production and sales rates. The turnover ratio of accounts receivable and inventory has declined, which is still manageable: 1Q13, the receivables turnover ratio and inventory turnover ratio of the company declined. The company is in the stage of in-depth channel exploration. The policy of giving certain incentives to channels is one of the channel strategies, and the phased decline in the turnover ratio of accounts receivable is reasonable. Furthermore, the 35,000-ton project has many product specifications and relatively few product lines. Achieving product serialization requires a certain amount of inventory accumulation, which reduces the inventory turnover rate to a certain extent. Considering that the company has been cooperating with dealers for a long time, that it has strong control over it, and that production and sales of the 35,000-ton project are still improving, the accounts receivable and inventory turnover rates are still within a manageable range. The Chuzhou project is another highlight of the product upgrade within 13 years: the product structure upgrade is the main theme of the company's growth, and the Chuzhou crystal high-end glass wine ware project is another highlight of the product upgrade within 13 years. It is expected that the project will be tested in 2Q13. Referring to the commissioning period of about one quarter of the 35,000-ton project, we conservatively assume in our profit forecast that the Chuzhou project will officially start production in 4Q13 and contribute 16 million in net profit. Considering that the product specifications of the Chuzhou project are relatively uniform (the commissioning period is directly correlated with the number of product specifications), the actual commissioning period may be less than 1 quarter, that is, there is a possibility that the profit contribution of the Chuzhou project in '13 will exceed our expectations. Upstream extension expectations have increased: On April 20, the company announced the signing of a framework agreement on the integration of quartz ore resources with Fengyang County. According to the agreement, the company will actively participate in the integration of quartz resources in Fengyang County to achieve upstream expansion into the industrial chain. Fengyang County is the main producer of quartz ore in China, and integrating Fengyang County's resources is of far-reaching significance for the company to stabilize its position as a leading domestic manufacturer of household glassware. At the same time, it is not ruled out that the company may later integrate quartz mines in other provinces. Profit forecasts and valuations maintain the 2013-2014 EPS performance forecasts of 0.42 yuan and 0.65 yuan respectively (maintaining conservative assumptions for the Chuzhou project), corresponding to the closing price of 12.77 yuan on April 23, 2013, PE is 30.1 and 19.8 times, respectively. Driven by the product structure upgrade, the company's profitability continues to improve, and expectations for upstream extension have increased, maintaining the “recommended” rating. Risk warning: Product structure upgrade progress is lower than expected; raw material prices fluctuate greatly, etc.