The large aircraft order was in line with expectations, and the reversal of performance in 2014 established a price reduction preparation plan, which led to a sharp decline in net profit. In 2013, the company's operating income was 2,324 billion yuan, an increase of 10.4%, and net profit attributable to the parent company was 39.25 million yuan, a decrease of 46.8%, corresponding to EPS of 0.14 yuan. The decline in performance due to the calculation of high-priced raw materials caused loss in inventory prices increased by 40.24 million yuan, and depreciation increased by 22.54 million yuan due to the consolidation of projects under construction. The traditional engine business has remained stable, and the large engine project has achieved revenue exceeding 100 million yuan. In 2013, the company's engine business revenue was 1.56 billion yuan, an increase of 9.73% over the previous year. Revenue from generator sets and accessories increased by 5.8% and 23%. According to estimates, MAN high-power medium-speed diesel engine sales revenue was about 127 million yuan, a sharp increase of nearly 2 times over the previous year. Meanwhile, revenue from the traditional engine, generator set and parts business was about 2.2 billion yuan, an increase of 4.5% over the previous year. Orders for high-power medium-speed diesel engines are growing rapidly, and break-even is expected in 2014. In 2013, the company received 448 million yuan of new orders; in 2012, it was only 111 million yuan. As of the end of the year, the order delivery cycle is 390 million yuan, and the order delivery cycle is generally 8-12 months. Considering the new orders signed in 2014, it is expected that the revenue of large-scale aircraft will reach 430 million yuan in 2014, which is expected to achieve break-even or a small profit. We expect that the construction of law enforcement official ships, offshore auxiliary ships, engineering ships, and ocean-going ships will drive a rapid increase in orders for large aircraft in 2014, and new orders for large aircraft projects are expected to reach 800 million yuan. The gross margin level rose slightly, and the expense ratio increased markedly during the period. The comprehensive gross profit margin was 12.2%, up 0.7 percentage points from the previous year, and the operating profit margin and net profit margin were 1.7%, down 2.1 percentage points or 1.8 percentage points. Among them, the gross profit margin for the fourth quarter was 16% in a single quarter, mainly due to the increase in sales share of 200-model engine sales with high gross margin, the start of delivery of 13-year orders for high-power mid-speed engines, the gross margin improved year-on-year, and the gross margin of generator sets increased by 2.2 percentage points. Maintain a “buy-A” rating. It is estimated that the company's net profit from 2014 to 2016 is 109 million yuan, 155 million yuan, and 202 million yuan, corresponding to EPS of 0.40 yuan, 0.57 yuan, and 0.73 yuan, and the company has 370 million yuan in cash. The market sales rate is only 1 times, and has a strong safety margin. As a listed company under the Shandong Provincial State-owned Assets Administration Commission, it is expected to benefit from accelerated state-owned assets reform in the future and maintain a “buy-A” rating, with a target price of 10.0 yuan for 6 months, corresponding to dynamic PE of 25 times in 2014. Risk warning. Delivery progress of large aircraft orders falls short of expectations; risk of rising raw material prices; risk of construction in progress being converted to fixed assets and increasing depreciation costs.