The company's main business: Jiangdian earnings continued to lose money, and Haidian's earnings shrank sharply. The former has continued to lose money in recent years due to fierce external competition and difficult internal costs to control. In 2008, Jiangdan Transportation lost about 345 million yuan, and continued to lose 100 million yuan from January to May 2009, seriously hampering the company's overall performance. The latter is the company's main source of profit, with a profit of about 460 million yuan in 2008. From January to May 2009, profits fell by about 80% year-on-year due to falling freight rates and shrinking cargo volumes. According to current trends, the company's annual results will lose money. Company strategy: Seek the full transportation capacity of the river and sea, and greatly expand marine capacity. The company is familiar with the advantages of the Yangtze River waterway and water flow changes, and has high-quality customers from many large steel and power companies along the Yangtze River. It has an innate advantage in developing direct full turnkey transportation from the river and sea. The company currently has orders for 60 new ships and 1.71 million DWT. Order Fengyao is an ocean ship. After all delivery, the company's marine capacity will increase by 2 times, and the compound growth rate of capacity from 2009 to 20 will be as high as 35%. In the future, the company will develop full transportation capacity across the river and the ocean, and its unique competitive advantage will help the company to obtain supplies and improve pricing capabilities. Bulk market trends: The long-term outlook is difficult to be optimistic. The BDI super bull market has led to a boom in shipping bookings. Currently, total orders for dry bulk carriers account for 69,4% of the current fleet size. Delays in delivery of new ships will continue to occur in the next few years, but continued deliveries can only “lift the tide”; only if the order is cancelled will “raise the salary from the bottom of the pot.” With regard to the current profit situation of shipowners, and at the same time, the complicated process of order cancellation and loss of reputation, we believe that the conditions for order cancellation are insufficient and have yet to be seen. As a result, the pressure of long-term excess capacity in the bulk market is still insurmountable, and the outlook is difficult to be optimistic. The main risks faced by the company: large capital expenses and fluctuating freight rates. The company's total order price is nearly 8.1 billion yuan, and the order size/net assets are as high as 5.3 times. Aggressive expansion will lead to continued huge capital expenditure over the next three years. The company's current balance ratio is as high as 75%, and there is no room for debt. Using market financing has become the company's only option, leading to further dilution of the share capital. Our profit calculation based on the company's order price simulation shows that the break-even point of the company's new ship roughly corresponds to BDI of 2,300 points. If COA lock-up is not adopted, freight rate fluctuations will have a significant impact on the profits of new ships. The elastic analysis shows that for every 500 points of BDI fluctuation, the company's gross profit for all new shipbuilding fluctuates about 200 million yuan. Investment advice: Maintain the company's “neutral” rating. Based on the company's current business conditions, we lowered the company's profit forecast (EPS to -0.13/0.16 yuan in 09/11; the original forecast value was 0.18/0.25). Compared to domestic and international shipping companies, the company's current valuation lacks an advantage. Taken together, the company's stock price did not reflect the decline in short-term performance, and capacity expansion faced the risk of capital expenditure and freight rate fluctuations, maintaining the company's “holding” rating.