From January to September 2013, the company achieved operating income of 1,666 billion yuan, a year-on-year decrease of 21.75%; operating profit of 41.966 million yuan, a year-on-year decrease of 59.83%; net profit attributable to owners of the parent company of 71,827,200 yuan, a year-on-year decrease of 19.77%; and basic earnings per share of 0.17 yuan. In the third quarter of 2013, the company achieved operating income of 626 million yuan, a year-on-year decrease of 14.22%; operating profit of 21.1 million yuan, a year-on-year decrease of 57.68%; net profit attributable to owners of the parent company was 24.06 million yuan, a year-on-year decrease of 42.51%; and basic earnings per share of 0.06 yuan. Revenues have fallen sharply, and government subsidies have increased dramatically. The company is the largest manufacturer of railway axles in Asia and a leading enterprise of railway axles and wheel pairs in China. Currently, it has the capacity to produce 180,000 axles per year. From January to September 2013, the company's operating income fell by 21.75% year on year, while the same period last year increased by 36.96% year on year. It received a government subsidy of 42 million yuan to slow the decline in operating profit. The gross margin declined slightly, and the expense ratio increased during the period. From January to September 2013, the company's consolidated gross margin was 11.08%, a slight decrease of 0.11 percentage points from the same period last year. The company's fee rate for the period was 8.21%, an increase of 2.02 percentage points over the same period last year. Non-public offerings break production capacity bottlenecks. The company went through a non-public offering in August 2013, and its non-developed shares raised 1.29 billion yuan for the following three projects: Ma Gang-Jinxi axle project; rail transit and high-end equipment manufacturing base construction project (phase I), and supplementary working capital. The Ma Gang-Jinxi axle project will build a production base with middle and high-end axles as a complement to ordinary axles, that is, mainly R&D, production and maintenance of high-speed axles, EMU axles, export axles, and urban rail transit axles, as well as the production of truck axles, to meet the needs of domestic and foreign axle markets, and form a production capacity of 70,000 sets of axles per year. After completion, the project achieved normal annual revenue of 3 billion yuan after delivery. At present, Ma Steel high-speed EMU wheels have passed expert inspection and have a production capacity of 50,000 high-speed EMU wheels per year. The company is developing and testing high-speed EMU axles. The rail transit and high-end equipment manufacturing base construction projects will build a new foundry production line to form a production capacity of 15,000 pillow/year for side racks, and add 15,000 sets of car hooks per year to form a production capacity of 15,000 sets/year. After completion, sales revenue will increase by 1.47 billion yuan a year after delivery. The implementation of the above fund-raising projects will further solve the company's production capacity bottleneck and bring new profit growth points to the company. Profit forecasts and investment ratings. The company's EPS for 2013-2015 is expected to be 0.29 yuan, 0.38 yuan, and 0.48 yuan, respectively. According to the company's latest closing price of 14.90 yuan, the price-earnings ratio is 47 times, 35 times, and 29 times, respectively. Thanks to the investment and completion of fund-raising projects, the company's leading position in the industry will be further strengthened, and we maintain the company's “increased holdings” investment rating. Risk warning: freight system reform is progressing too slowly; high-speed EMU axle development is below expectations; competition in the axle and truck markets has intensified after the General Railway's market-based reforms.