1. Incident Overview Recently, we participated in Boshen Tools research activities and exchanged views with the company on future business conditions. 2. Analysis and judgment that high-speed rail brake pads have obtained CRCC certification. Loading tests are underway. The company received the “Railway Product Certification Certificate” issued by CRCC on January 8, 2016, indicating that after verification processes such as 1: bench test, initial factory inspection, product sampling inspection, and post-certification supervision, powder metallurgy brakes for EMUs manufactured by the company have met CRCC's requirements for manufacturing and quality management standards, and have met the requirements for subsequent loading assessments. The company is actively contacting relevant parties to carry out on-road loading assessments. There is plenty of room for brake pad imports to replace, and it is expected to become a new engine for future growth. It is estimated that by the end of the 13th Five-Year Plan, the high-speed rail operating mileage will reach 30,000 kilometers. As the scale of high-speed rail construction continues to increase, the number of EMUs that match it will also need to continue to increase. According to the ownership density of 0.75 vehicles/km, China's EMU fleet ownership in 2020 is about 3100-3200 standard. The corresponding high-speed rail brake pad market size is about 5 billion yuan per year. The level of localization of high-speed rail parts in China is still low, and high-speed rail brake pads are heavily dependent on imports. For a long time, German Knorr-Bremse had a basic monopoly position in China's high-speed rail brake pad market. This situation eased after the technical protection period expired in 2012, while also opening up space for the localization of high-speed rail brake pads. The brake pads manufactured using the powder metallurgy technology used by the company are advanced technology used in brake pads at this stage, and are expected to become the company's new growth engine after industrialization in the future. The downstream real estate and construction decoration industry is declining. The main business of diamond tool pressure companies is the development and production of diamond tools, power tools, and alloy tool products. The downstream customers of diamond tools are mainly in the real estate, infrastructure, decoration and other industries. In recent years, as the downward pressure on the downstream infrastructure, real estate and decoration industries has increased, demand for diamond tools, etc. has also continued to decline. The company's 15-year performance forecast shows that net profit fell 55%-85% compared to the same period last year. In order to cope with this unfavorable situation, the company increased its overseas sales efforts and expanded to high-end tools in an effort to change the unfavorable situation of its traditional main business. 3. Profit Forecast and Investment Suggestions: Based on traditional main business estimates, the company's 15-17 EPS is expected to be 0.02, 0.08, and 0.11 yuan, respectively. I am strongly optimistic about the huge profit margin brought by the industrialization of high-speed rail brake pads. It is expected that large-scale sales of brake pads will be achieved in 2017 as soon as possible. Based on the initial supply of 10,000 pieces, the revenue for 17 years will reach 60-80 million, corresponding profit of 2400-32 million. Considering the long cycle of follow-up testing, supplier review, bidding, and industrialization, the performance release has yet to be covered for the first time in a while, giving it a “careful recommendation” rating. 4. Risks suggest that the prosperity of the downstream industry continues to decline; high-speed rail brake pad testing and industrialization are falling short of expectations