Report summary: The company's performance for the first half of 2012 fell short of expectations: operating income of 616 million yuan, down 21% year on year; operating profit of 24.96 million yuan, down 34% year on year; net profit attributable to shareholders of listed companies of 23.88 million yuan, down 29% year on year; and earnings per share of 0.22 yuan. Among them, the EPS for the second quarter was 0.12 yuan. The company expects net profit to increase by -30% to 5% year-on-year in January-September. Prices of major color coating products fell 8.7% year on year in the first half of this year. When the average price decline in the industry was not very drastic, the company's operating income fell 21% and profit fell 29%. This may be due to: (1) severe contraction in export market demand, and exports fell 84% year on year; (2) the competitive pattern in the high-end product market also gradually deteriorated: earlier in the low-end product field, homogenized products in the industry developed too fast, intensifying market competition, leading to a decline in profit to a state of marginal profit. As a result, companies in the industry sought transformation, and there were not enough barriers to entering the high-end market. High, leading to a market for high-end products Falling into a pattern of overcapacity and vicious competition, the revenue of the company's high-end products declined sharply in this period. In terms of revenue by product, the least profitable board revenue fell 16% year on year, while the profit of other high-end products declined by as much as 23%-85%. The production capacity of functional organic coated sheets will increase by leaps and bounds in the future. The capital investment capacity of 220,000 tons of functional organic coated boards is equivalent to 2.7 times the current production capacity. However, we believe that the performance of functional organic coated boards will not reach such a high rate of growth: (1) Since newly built functional organic coated boards use substrates, the current gross profit of substrates is about 300 yuan/ton, and currently exported substrates will supply fund-raising projects in the future, so the gross profit contributed by the fund-raising project alone will not reach the level shown in the current report; (2) the construction period of the fund-raising project alone will not reach the level shown in the current report; (2) the capacity utilization rate for the first three years will be 20%, 80%, and 100%, respectively, so the capital utilization rate for the first three years will be 20%, 80%, and 100%, respectively, that the fundraising projects will concentrate on contributing to performance from 2014. Since the company's share in the segment reached second place, the company's huge production capacity investment at that time may have an impact on the market segment. Moreover, due to intense competition for ordinary organic coating boards, future manufacturers may also enter the functional organic coating board field on a large scale, causing product gross margin to be compressed. The predicted EPS for 2012-2014 is 0.4, 0.49, and 0.62 yuan, respectively, and the corresponding PE is 25, 21, and 16 times. The company was given a “Neutral-A” investment rating, and the target price was 11 yuan. Risk warning: Fundraising projects are progressing less than expected