Event description Xinda New Materials released its 2013 three-quarter report. During the reporting period, the company achieved operating income of 954.24 million yuan, an increase of 41.95% over the previous year; realized net profit attributable to the parent company of 6.91 million yuan, an increase of 128.62% over the previous year; and achieved an EPS of 0.01 yuan. Among them, it achieved operating income of 454.75 million yuan in the third quarter, an increase of 102.23% over the previous year; realized net profit attributable to the parent company of 14.08 million yuan, compared to -3.73 million yuan for the same period last year; and EPS for the third quarter was 0.03 yuan and 0.004 yuan for the second quarter. The combined effects of strong and strong incident reviews are gradually showing, and demand for downstream recovery is slowly recovering. The company's revenue for the first three quarters increased by 41.95% year on year. Due to the impact of mergers and easy new materials, the year-on-year data is of little significance. Quarterly revenue for the 3rd quarter increased by 43.93% month-on-month: (1) Yicheng New Materials revenue began to be incorporated into the company report on April 27, and there was also a slight difference in data caliber from month to month; (2) The downstream photovoltaic industry has continued to recover since the beginning of the year, but due to cost control by downstream companies, there has been no strong demand for cutting toughness, showing a slow recovery situation. After the merger of the company and Yicheng New Materials, the market share was further expanded, and the strong alliance increased the company's market competitiveness. Downstream recovery and strong alliances led to a steady increase in the company's sales volume. Gross margin remained stable in the third quarter, and net interest rates rebounded due to falling expenses. The company's gross margin for the third quarter was 18.02%, which was basically stable from 18.30% in the second quarter, but there was a clear recovery compared to the previous period: the gross margin of the incorporated Yicheng New Materials was higher, and the market share increased after the merger, and the company's bargaining power strengthened. The company's three expenses in the third quarter fell to 17.62% from 21.29% in the second quarter. The decline in the fee rate led to a continuation of the upward trend in net interest rates in the previous period, rising from 0.68% in the second quarter to 3.10%. Accounts receivable rose month-on-month, and turnover accelerated. The company's accounts receivable at the end of the third quarter was 970 million yuan, up from 845 million yuan in the second quarter; the company's accounts receivable turnover days and inventory turnover days fell from 231 days and 367 days at the end of the second quarter to 199 days and 308 days, respectively, and operating capacity improved markedly. The restructuring was completed and market share increased. The synergy effect will drive profit recovery and maintain careful recommendation ratings. The company has completed the restructuring of Yicheng New Materials. Yicheng's profitability is relatively strong, and the gross margin is around 20%. After the restructuring, the company's market share of cutting materials reached 40%. After the restructuring, bargaining power and market influence increased, which is conducive to product price stability. The synergy and scale effects after the strong merger will drive the company's profit recovery. Furthermore, the company laid out the diamond wire field and put into operation a new 3.6 million kilometer resin diamond wire project, which mainly targets Japanese customers, and is expected to contribute to increased profits in the later stages. The company expects to achieve net profit of 53 million to 73 million yuan in 2013, equivalent to an EPS of 0.11-0.15 yuan. We expect the company's EPS for 2013 and 2014 to be 0.11 and 0.20 yuan respectively, corresponding to the current stock price PE of 89 and 46 times, maintaining a prudent recommendation rating.