Incident: On the evening of October 21, Yangzi New Materials released its 2013 three-quarter report. During the reporting period, the company achieved operating income of 1,074 million yuan, up 15.93% from the same period in 2012; net profit attributable to shareholders of listed companies was 30.94 million yuan, up 5.49% from the same period in 2012; and basic earnings per share of 0.19 yuan. It was in line with our previous expectations. Comment: Performance is in line with expectations. Affected by the continued downturn in the global macroeconomic economy, investment in the downstream sector of the organic coated board industry has clearly weakened, thus affecting demand for organic coated board products, making the contradiction between supply and demand in the industry prominent, and the company's performance inevitably affected. During the reporting period, the company actively developed new customers by increasing its sales team. Despite the overall downturn in the industry, there was a clear recovery in sales in the third quarter. The company's quarterly revenue for the third quarter was 400 million yuan, up 29.29% year on year, while revenue for the first quarter and second quarter increased by only 3.75% and 13.85% year on year. Furthermore, the company's gross margin level for the first three quarters was 8.44%, a slight decrease of 0.3 percentage points from the same period in 2012. Mainly, the company sacrificed product prices to a certain extent in order to increase sales volume. The period fee rate, on the other hand, fell 0.31 percentage points year over year to 4.96 percent, and remained basically stable. Overall, the company's three-quarter report performance improved markedly compared to the previous period. Optimistic about the development prospects of functional organic coating boards. At present, the domestic supply of ordinary organic coated boards exceeds demand, and competition for homogenization will still be intense in the future. Functional boards benefit from the upgrading of the domestic industrial structure and the construction of strategic emerging industries. Market demand is showing a rapid upward trend. Their share of organic coated boards is expected to reach 32% in 2015, an increase of 14 percentage points over 2011. However, as one of the first private enterprises in China to enter the organic coating board industry, Yangzi New Materials has mastered the key technologies and processes for the production of functional organic coated boards such as high cleanliness, antistatic, and high toughness and stain resistance, and is a national high-tech enterprise. The fund-raising project progressed smoothly, seizing the high-end market. The company currently has an organic coating board production capacity of 80,000 tons/year and a substrate production capacity of 200,000 tons/year. After the fund-raising project is completed (we expect production to be completed in February 2014), an additional 220,000 tons/year of functional organic coating board production capacity will be added. The company's “substrate-organic coated board” production chain will be further improved, and the existing product structure will also be optimized and upgraded. Also, due to the high gross margin of functional boards, the company's performance is expected to gradually improve as their share of revenue increases. Earnings Forecast and Rating: We maintain the Company's 2013-2015 diluted EPS of $0.26, $0.35, and $0.48. Considering the leading position of Yangzi New Materials in functional organic coated boards and the high probability that performance will improve in the next few years, we maintain the “increase in ownership” rating of the company. Risk factors: economic performance is declining, downstream demand is slowing; production line construction progress falls short of expectations; accounts receivable increased sharply.