Incident Jianxin Co., Ltd. issued a pre-increase announcement for the third quarterly report. The net profit attributable to the parent company for the 1st to 3rd quarter is estimated to be 21.3 million yuan to 22.5 million yuan, an increase of 48.75% to 57.13% over the previous year. It is estimated that in the 3rd quarter of 2013, net profit will be 17.21 million yuan, up 230%-254% year on year, and 2773% to 2981% month on month, that is, a single quarter increase of about 2.3 times year on year and 27 times month on month. The results surpassed previous market expectations and set a record high profit in a single quarter since the announcement; at the same time, the results confirm the logic of the industry and company fundamentals rising at an inflection point. Comment (1) Four reasons led to a sharp increase in the company's performance: Reason 1: Fund-raising projects were put into operation, and production capacity increased; Reason 2: Affected by national environmental protection policies, the company's main competitors of old products cut or stopped production one after another due to limited environmental treatment capacity, further increasing the market share of the company's products and increasing product sales; Reason 3: Due to environmental treatment costs, increased labor costs, and fluctuations in raw material prices in the company's product production costs, the company raised the sales price of some products, and the increase in sales prices was greater than the increase in production costs; Reason 4: Since the third quarter, through scientific research and development and technological improvements, the company has continuously reduced production costs, increased product yield, and increased the gross margin of the company's products. (2) The company's investment logic and environmental protection inspections tend to be strict → small industry capacity withdrawals → industry concentration increases → product prices rise → leaders benefit, and the company's performance rises. Currently, the global market share of Jianxin Co., Ltd. has reached 60% to 70%, and it has strong pricing power for product prices; in addition, the company's fund-raising production capacity has been fully put into operation, and it has the ability to replace the small production capacity market share that has been withdrawn. Profit forecast and investment recommendations We estimate that the company's EPS for 2013-2015 was 0.45 yuan, 0.59 yuan, and 0.80 yuan, respectively. The following factors are comprehensively considered: (1) the company's dominant position in the “interamino industry chain”; (2) environmental protection inspections are getting stricter and small production capacity is being eliminated; (3) downstream demand fields with high added value are continuously expanded; (4) fund-raising projects are put into operation to provide increased production capacity; (5) as industry concentration continues to increase, product prices in the amino industry chain are expected to rise. Based on this, the company is given a “buy” rating. Risk warning 1. Production pollution accidents; 2. Terminal demand continues to be sluggish; 3. Core product advantages disappear.