1. Incident Overview The company recently announced the relevant announcements and supplementary announcements on the “Shenyang Hunnan New Town Integrated Pipeline System Phase I and Phase II Construction Project”. It has negotiated and improved with the government on the demolition and repurchase period issues. The “Phase I Continuation” and “Phase II” projects will be paid and settled separately, and will enter the repurchase period separately. It is expected that this year it will receive part of the settlement funds for the “Phase I Continuation” project. The cash flow situation will improve. According to the current progress of the company's various businesses, we expect the EPS for 14-16 to be 0.47, 0.66, and 0.88 yuan respectively, maintaining a “highly recommended” investment rating, with a reasonable valuation range of 19-23 yuan for 6 months. 2. The Hunnan Management Committee is responsible for analyzing and judging the difficult road sections for demolition. “Phase I Continuation” and “Phase II” respectively entered the repurchase period. The company won the bid for the first phase of the Hunnan New Town Integrated Pipeline Gallery in the form of BT in August 2012, with a total planned investment of 1,075 billion yuan. The planned construction period is from September 17, 2012 to June 30, 2013, for a total of 26.2 kilometers. After delivery, acceptance, and handover, the repurchase period begins, and the contract price is paid over three years at a ratio of 33%, 33%, and 34%. Currently, the “Phase I Continuation” project was delivered in October '13, while the “Phase II” project is still under construction due to the remaining 3.5 kilometers of land acquisition and demolition issues. Following negotiations with the government, this announcement mainly addresses two issues: (1) due to the difficulty of land acquisition and demolition of the remaining 3.5 km, the University Science and Technology City (Hunnan New Town) Management Committee will be responsible for the demolition issues; (2) the original contract stipulated that the first phase of the second phase of the project would be paid for and used together after construction was completed, and settlement began. After negotiations with the government, the “Phase I Continuation” and “Phase II” projects will be paid and settled separately. It is expected that part of the settlement funds for the “Phase I Continuation” and “Phase II” projects will enter the repurchase period separately. Orders for intelligent mechanical equipment and automation integration are full and growing steadily. We are optimistic that the company's long-term development has benefited from improvements in the downstream tire industry in the second half of last year. The company's tire molding machine orders are full this year, and the automated integrated system is expected to continue to grow at a high level this year. The repayment issue for integrated pipe gallery projects has been further solved. We are optimistic about the company's continuous expansion in the fields of digital factories, smart cities, and precision machinery (electric spindles and CNC machine tools) for a long time. 3. Stock Price Catalysts and Risk Alerts Stock Price Catalysts: The company undertakes new smart city and municipal construction orders; breakthroughs have been achieved through external acquisitions. Risk warning: The company uses BT to accept government orders, and there is a risk of delays in repayment; currently the company is in a period of rapid expansion of scale and personnel, and there are certain management risks; the macroeconomic environment continues to be sluggish, and policy promotion falls short of expectations. 4. Profit Forecast and Investment Suggestions Currently, the company's orders for intelligent machinery equipment and automated integrated systems are full and growing steadily. We are optimistic about the company's continuous deepening expansion in the fields of digital factories, smart cities, and precision machinery (electric spindles and CNC machine tools) for a long time. According to the current progress of the company's various businesses, we expect the EPS for 14-16 to be 0.47, 0.66, and 0.88 yuan respectively, maintaining a “highly recommended” investment rating, with a reasonable valuation range of 19-23 yuan for 6 months.