The results are in line with expectations. The company disclosed results for the first three quarters: revenue fell 11% year on year to 510 million yuan, benefiting from improved gross margin and cost control. Net profit increased 14% year over year to 75 million yuan, and recorded EPS of 0.33 yuan, in line with expectations. Among them, 3Q 2013 revenue fell 11%, and net profit increased 36% year on year, further confirming that it had broken out of the trough. Volume contracted and profits increased, and new products, overseas markets, and refined management drove profit growth against the trend. The reduction in the amount of gas shielded welding for new products and the reduction in niche products is still the core reason driving the decline in volume and profit; domestic demand is still sluggish and is still declining year on year, but overseas markets continue to expand effectively; the three cost rates are still improving year on year, and 3q is down 1.4ppt year on year. The profit quality is high, and there is plenty of cash. The company achieved a net operating cash flow of 150 million yuan in the 1st to 3rd quarter, twice its net profit, and effective control of accounts receivables/inventory, etc., all continued to be superior to those of listed companies in the same industry. By the end of the 3rd quarter, the company had 1.14 billion yuan in monetary capital, no debt, and the net cash balance continued to rise, which is currently equivalent to 50% of the total market value. Development trends Overseas markets still have great potential for growth. Self-branded machines such as Ruiling/Ryzen are still entering more developing markets. The recognition of the number one domestic welding machine brand is beginning to be widely recognized overseas, and most overseas markets are also under a healthy endogenous growth trend. By continuing to launch new products, profit indicators can maintain their current good state. After the various specifications and models of gas shielded welding received market recognition, the company's digital welders are ready to go, and automated products such as welding robots are still potential highlights. Overall, the new product echelon brought about by continued high R&D investment (4 to 5% of revenue) helped the company maintain a good level of profit indicators. The net profit margin for the 1st to 3Q was 14.6%, an improvement of 3.3% over the previous year. A rebound in domestic market demand, or epitaxial expansion, will bring significant stock price elasticity. The domestic market has been sluggish for two years. Currently, the distribution chain has yet to feel a recovery in demand, but industry integration continues to advance, and domestic sales are more likely to achieve positive growth next year as the base declines. The company's previous annual reports explain the corporate strategy of integrating the industry and extending the industrial chain. Currently, there is plenty of capital on the books. If there is epitaxial expansion, stock prices will also be clearly elastic. The profit forecast was adjusted to maintain the company's EPS of 0.42 yuan and 0.53 yuan from 2013 to 2014, respectively. Valuation and recommendations The company's current stock prices correspond to PE of 24x and 19x, respectively. The company's profit quality is high, growth is sustainable, new product highlights are clear, recommendations are reiterated, and medium- to long-term investors are encouraged to actively participate.