Key investment points: High-speed rail brake pads may become a new profit growth pole for the company. In the field of high-speed rail brake pads, the company has basically completed the early R&D and manufacturing process, and has obtained CRCC certification. In the next year, the company will speed up the last hurdle before mass production of high-speed rail brake pads - loading tests. We expect the company to commercialize high-speed rail brake pads in the first quarter of 2017 as soon as possible. It is conservatively estimated that in the first year of entering the brake pad market, the company will receive a market of 50,000-10,000 pieces, that is, it will receive revenue of 35-70 million yuan; by 2018, the company is expected to receive 10% of the brake brake market, or about 600 million yuan in operating income; in the long term, 2020, it is expected to reach about 20%. The company's high-speed rail brake pads have broad development prospects, and may become a new driving force for the company's growth in the future. The traditional diamond tool industry is changing from mid-end to high-end, and from domestic to overseas. In the field of diamond tools, the company seeks the transformation of products from the middle end to the high-end, as well as the transformation of key market areas from domestic to foreign countries. Faced with declining domestic demand and declining profit margins, the company has set up an R&D center in Korea to lay out the high-end market for diamond tools. It is anticipated that the gross profit of the company's high-end diamond tools will increase to between 40%-50% in the future; at the same time, the company is actively expanding sales in overseas markets to hedge against the decline in domestic market demand. This series of measures may improve the company's profit situation in 2016. Investment suggestions and profit forecasts are based on the above analysis. We are optimistic about the company's development over the long term, covered for the first time, and gave the company a “buy” investment rating. We expect the company's EPS for 2015-17 to be 0.05, 0.08, and 0.45 yuan/share, and the corresponding PE is: 203X, 127X, and 23X, respectively. Considering the broad market space for high-speed rail brake pads, the company has huge potential for future development. We gave the company a PE level of 40-50 times in 2017, with a corresponding valuation of 18-22.5 yuan/share; from a longer-term perspective, we gave the company a PE level of 60-70 times, with a corresponding valuation of 27-31.5 yuan/share.