From January to September 2013, the company achieved operating income of 1.808 billion yuan, an increase of 18.99% over the same period last year; operating profit of 6.7 million yuan, up 9.15% over the same period last year; total profit of 11.17 million yuan, down 14.60% from the same period last year; net profit belonging to the owner of the parent company was 7.56 million yuan, an increase of 19.51% over the same period last year; basic earnings per share are 0.016 yuan. Among them, the net profit attributed to the owner of the parent company from July to September was 1.54 million yuan, down 84.28% from the same period last year, but reversed the loss from the previous month; basic earnings per share was 0.003 yuan.

The income grew steadily and the performance fell short of expectations. During the reporting period, affected by the accelerated release of Runfeng's 50, 000-ton aluminum foil production capacity, IPO's 30, 000-ton aluminum foil project and Qinghai Xinheng aluminum strip project, the company's sales increased, leading the company to achieve an 18.99% year-on-year increase in operating revenue. But at the same time, due to the increase in asset consolidation and depreciation, the slow release of production capacity pushed up the unit cost of products, resulting in a year-on-year decline in the company's comprehensive gross profit margin of 0.93 percentage points to 10.78%, of which the gross profit margin in the third quarter was 8.91%, which is at a low level. The operating profit of the company in the third quarter was 800000 yuan, which was lower than we expected, but under the influence of government subsidies, the company realized a net profit of 1.54 million yuan belonging to the owner of the parent company in the third quarter.

Fourth-quarter results are still not optimistic. Since listing in 2010, the company has successively built the 30,000t IPO project, Runfeng 50,000t high precision aluminum foil project, 50,000t high precision aluminum strip project, Qinghai Xin Heng 450000 ton high precision aluminum strip project (melting, casting and hot rolling part), Boxing annual output of 450000 tons high precision aluminum strip project cold rolling part (first phase 240000 tons). With the gradual consolidation of the project, but the slow release of production capacity, resulting in low profitability of the company. This factor still exists in the fourth quarter, which will lead to a decline in the company's full-year performance, which is expected to decline by 40% and 70% in its third quarterly report. The progress of subsequent capacity release depends on downstream demand and the company's market development.

Earnings forecast and investment rating: we expect the company's EPS from 2013 to 2015 to be 0.02,0.06 and 0.27 yuan respectively, with a dynamic price-to-earnings ratio of 247,95 and 23 times respectively based on the latest closing price of RMB 6.04. in view of the lower-than-expected release of the company's production capacity, we downgrade the company's investment rating to "neutral".

Risk hints: 1) the risk that the release progress of capacity is lower than expected; 2) the risk that downstream demand growth is lower than expected; and 3) the risk of large fluctuations in aluminum ingot prices.