In 2010, the company achieved an operating income of 164 million yuan, an increase of 20.55% over the same period last year; an operating profit of 34.49 million yuan, an increase of 13.70% over the same period last year; a net profit of 30.79 million yuan belonging to the owner of the parent company, an increase of 16.62% over the same period last year; and basic earnings per share of 0.52 yuan, in line with our expectations. The profit distribution plan for 2010 is to increase 5 shares for every 10 shares, with a dividend of 1.5 yuan (including tax).

In the first quarter of 2011, the company realized operating income of 33.28 million yuan, up 30.91% from the same period last year; realized operating profit of 4.01 million yuan, down 15.36% from the same period last year; realized net profit of 4.53 million yuan belonging to the owner of the parent company, an increase of 22.09% over the same period last year; and realized basic earnings per share of 0.063 yuan per share.

The construction of sales channels and the steady growth of business income. The company's main automation instruments, the main products are electric actuators, flow meters, signal conditioning instruments and so on.

For the whole of 2010, the company's operating income increased by 20.55% compared with the same period last year. Among them, the revenue of electric actuators increased by 9.73% year-on-year, accounting for 35.21% of the total revenue; Flowmeter revenue increased by 50.81%, accounting for 23.27% of the total income; signal conditioning instrument revenue increased by 28.43% year-on-year; control valve revenue decreased by 24.31%.

In the first quarter of 2011, the company's operating revenue increased by 30.91% compared with the same period last year, down 23.98% from the previous quarter. Judging from the operating income of each quarter in 2010, the company's operating income has certain seasonal characteristics, and the income in the first quarter is relatively low. We judge that the quarter-on-quarter decline in operating income in the first quarter of 2011 is due to seasonal factors in product sales, and believe that the company's operating income is still growing steadily.

On the one hand, the growth of the company's operating income is due to the improvement of the company's popularity, on the other hand, it is due to the strengthening of the construction of sales channels and the improvement of sales ability.

Gross profit margin remains high. The company's gross profit margin was 52.17% in the first quarter of 2011, compared with 53.47% in 2010. The company's gross profit margin remains high, mainly due to the scale effect caused by the improvement of product technology and the increase of sales revenue.

The cost of sales is soaring. In 2010, the company's sales expense rate was 24.84%, an increase of 5.16% over the same period last year. The increase in sales expenses was mainly due to the company's expansion of sales channels. As the company is still committed to improving the sales force in 2011, we believe that sales expenses will continue to grow, but as the company's operating revenue increases, the sales expense rate will decline.

Fund-raising projects will enhance the company's market competitiveness. The company's IPO investment project is the R & D and industrialization project of intelligent instruments, intelligent electric actuators and flow meters. The project is still under construction and is expected to contribute performance in 2012.

The commissioning of the fund-raising project will enhance the technical level and production capacity of the company's main products, so as to enhance the company's market competitiveness and expand market share.

Profit forecast and rating. It is expected that the company's earnings per share from 2011 to 2013 will be 048,0.64 and 0.80 yuan respectively. According to the closing price of 21.88 yuan on April 27th, the corresponding dynamic PE is 45 times, 34 times and 27 times respectively. We maintain the company's "neutral" investment rating.

Risk tips: 1) the risk of declining demand in the downstream industry of the fund-raising project; 2) the risk of the international cooperation model.