Incident: The company announced that executives have increased their holdings in the secondary market by 1.15 million shares and will continue to increase their holdings, accumulating no more than 2% of the total share capital. Comment: The company is a leader in the coupling industry, with a domestic market share of over 20%. The company's main products: universal couplings, drum-shaped gear couplings, cutting blades, precision drums, composite skateboards, automobile transmission shafts, etc. Among them, universal couplings, drum-shaped gear couplings, and cutting blades are the company's main products, accounting for more than 80% of total revenue. The company is a leader in the domestic coupling industry, with an industry market share of over 20%. Judging from the downstream distribution, steel accounts for 55% of the demand for coupling products, and construction machinery accounts for about 30%. Customers include China First Heavy Industries, Dalian Heavy Industries, Shanghai Heavy Industries, Nanjing High Gear, etc. Couplings are used to connect two shafts (active shaft and driven shaft) in different mechanisms so that they rotate together to transfer torque. In high-speed heavy duty power transmission, some couplings also have the effect of cushioning, damping vibration, and improving the dynamic performance of the shaft system. The company's main customers include large enterprises such as China Yizhong, Shougang, Angang Steel, Baogang, and Jigang. High-end coupling import replacement space is vast: Foreign companies in the coupling industry include German Voith Drive Technology Co., Ltd., and the main domestic companies include Tyre Heavy Industries, Deyang Lida Basic Parts Co., Ltd., Wuxi Universal Couplings (which are ordinary universal shafts and large universal shafts), and Kunshan Rongxing Power (universal couplings, drum-shaped gear couplings). The technical content of ordinary coupling products is low, there are many domestic manufacturers, and the phenomenon of product homogenization is serious. Competition is reflected in price and service, and domestic products occupy the vast majority of the market share. Currently, domestic manufacturers and foreign companies each account for half of the market share of mid-range products. High-end products, such as couplings used in cold-rolled strip production lines, generally need to be imported along with foreign cold-rolled strip production lines. Due to technological progress and outstanding cost performance advantages, the market share of domestic enterprises is gradually expanding, and import substitution will be the company's main growth point in the future. It has taken a stake in Jingtian Hydraulic and has a wide range of products: The company invested 90 million yuan to hold 5.22% of Anhui Jingtian Hydraulic Company's shares. Jingtian Hydraulic is currently the medium-sized manufacturing enterprise with the widest product portfolio, the longest product line, and the highest product correlation in the field of hydraulic demolition in China. Therefore, the company is also an invisible robot manufacturer. If the demand for dismantling robots from Jingtian Hydraulic is strong, the company is expected to continue to expand and strengthen the robot business segment. The main products of Jingtian Hydraulics include: 1. Hydraulic Breakers (used for crushing in highways, construction, metallurgy and other industries); 2. Multifunctional demolition robots (used for demolition work in metallurgy, construction, nuclear energy, chemical, rescue and other industries); 3. Fixed hydraulic crushers (used for mining and metallurgical blockage treatment), etc. Company Strategy 1: Couplings are consumables to expand the market for renewal and maintenance services. Steel accounts for 55% of the demand for coupling products. Couplings are mainly used to add additional steel production capacity and upgrade old facilities. The growth rate of demand for couplings is directly proportional to the growth rate of new steel production capacity and the growth rate of existing production. Coupling products are consumables that need to be repaired in 1 year, replaced in 2 years, and the gross maintenance margin is high. Furthermore, cutting blades are an essential key component of metal shearing equipment for various steel production lines of steel companies. Currently, the domestic cutting blade industry has gradually taken on the production of various cutting edge products in steel companies' production lines, such as hot rolled, medium and thick plates, and cold-rolled sheets, and the cutting edge parts used in steel companies' production lines have begun to be localized on a large scale. Blade cutting products are consumables, and the service life is about 3 to 15 days. We predict that as the number of couplings and cutting blades becomes larger and the size of the maintenance service market gradually expands, the high-margin service business is expected to become a new growth point for the company. Company Strategy 2: Grow the industrial chain and provide integrated equipment. The company continued to extend the production chain on the basis of making traditional couplings and scissor blade products, and developed new high-margin products such as rolls and skateboards. From 2011 to 2013, the gross margin of rolls and skateboards rose to 43.1% and 55.8%, respectively, and the revenue share increased to 3.6% and 1.3%, respectively. Rolls are mainly used in hot rolled strip production lines such as hot rolling and furnace coiling. The skateboard is an important product for use in rolling equipment in the metallurgical industry. It is installed on both sides of the rolling mill frame and roller bearing seat. When the roller bearing seat slides on the frame, the skateboard protects the installation surface and guide. In 2013, the company issued convertible bonds to raise 320 million yuan for precision roll projects, cold-rolled universal shaft projects, and composite skateboard projects. As the fund-raising project is put into operation, the share of high-margin products will further rise, raising the company's overall profit level. Executives continue to increase their voting interest in the company's shares, and the main business is expected to bottom up: in 2013, the company's revenue was the lowest point in nearly 3 years, and net profit was the lowest point in 8 years. The company announced on March 5 that company executives continued to increase their holdings in the secondary market, with a cumulative total of no more than 2%, indicating that they are very confident about the company's future. Since there is a certain degree of rigidity in demand for the company's products as consumables, there should be a certain rebound after a 2-year low, and as the company's share of new products with high gross margin rises, the company's profit level will also improve, so we predict that the company's 14-year performance is expected to bottom out and rebound. Investment advice: Forecast that the company's EPS will reach 0.18 or 0.24 yuan in 2014-2015, corresponding PE will be 34 times and 29 times. For the first time, an “gain” rating was given. Risk warning: 1. Downstream steel production falls short of expectations due to the macroeconomic downturn; 2. There is a risk that performance will fall short of expectations due to slow progress in the service market.