Company announcement 2012 three-quarter report: From January to September, the company achieved operating income of 4,086 billion yuan, a year-on-year increase of 8.24%, and realized imputed net profit of 42 million yuan, a year-on-year decrease of 28.37%, and EPS of 0.12 yuan; 2. July-September, the company achieved operating income of 1.4 billion yuan, an increase of 5.23% over the previous year, and realized imputed net profit of 13 million yuan, a year-on-year decrease of 36.48%, and EPS of 0.04 yuan. Key investment points: The results of the three-quarter report fell short of expectations. There are three reasons: ① The company's construction machinery sector, due to the double impact of the slowdown in macroeconomic growth and cyclical adjustments in the industry, the entire industry continues to be sluggish. Affected by this, the sales revenue and profit of the company's construction machinery business declined compared to the same period last year (we expect the net profit of the company's construction machinery business to fall by 60%-70% year on year); ② Expenses increased significantly: In the third quarter report, the company's period expenses increased by 1.16 percentage points (from 9.83% in the semi-annual report to 10.99% in the three-quarter report), mainly in line with the company's nationwide strategic expansion, employees, and employees The number of people increased, and the company's expenses for operating and management expenses such as remuneration, travel, and office also increased compared to the same period last year; ③ The investment structure of hierarchical holdings has led to a relative increase in the share of minority shareholders' equity, and the net profit attributable to the parent company has been diluted to a certain extent. The company's main agricultural machinery business is operating normally. As the state continues to increase its support for agricultural machinery purchase subsidies and the gradual maturity of the operation and management of newly opened direct-run stores in the early stages, the sales scale and net profit of the company's agricultural machinery business have been growing steadily. We expect that in January-September, the sales revenue of the company's main agricultural machinery business will grow at a rate of around 20%. Among them, agricultural machinery business in Liaoning, Heilongjiang, Jilin, Chongqing, Yunnan and other places is growing rapidly. The effects of the “improve quality and increase efficiency” strategy are beginning to show. At the beginning of the year, the company proposed to promote the development strategy from epitaxial growth in the past to epitaxial growth in parallel with implicit growth. Currently, the results seem obvious: the comprehensive gross margin of the company in the three-quarter report increased 0.9 percentage points (from 13.04% in the semi-annual report to 13.94%). In '13, the agricultural machinery purchase subsidy policy is expected to change, that is, from the original “differential purchase” and “target system” to a “full purchase of machinery” and a “general preferential system”, which will have a profound impact on the agricultural machinery distribution industry. Profit forecast: Since it is still difficult for the company's construction machinery business to recover in the fourth quarter, we lowered the company's EPS for 12-14 to 0.17, 0.22, and 0.31 yuan. We believe: ① Affected by macroeconomic and corporate strategic changes, 12 years will be a year of hard work for the company; ② The company's future trend of growing into the king of agricultural machinery distribution in China will not change. The current stock price is 34 times that of PE, and the target price is 8 yuan, “Recommended”. Risk warning: agricultural machinery policy adjustment risks, business risks during expansion, capital bottlenecks