Event description Lianyungang released its 2012 annual report. Operating income increased 7.65% year on year to 1,615 million, gross margin decreased 1.42 percentage points to 26% year on year, and net profit attributable to parent company shareholders increased 3.04% year on year to 151 million yuan, achieving an EPS of 0.19 yuan, the same as the previous year. Profit distribution plan: Cash dividend of 0.6 yuan (tax included) for every 10 shares. The scale of the incident review business expanded by about 10%, management expenses rose, and performance remained the same year over year. The company's throughput and operating income in 2012 increased by 10.38% and 7.65% year-on-year respectively. The revenue growth rate was slightly lower than the throughput growth rate, mainly because since 2012, cargo port fees were no longer included in the company's main business revenue, but were directly refunded in non-operating income at a rate of 50%. If the return of 26.5 million cargo port charges is added back to 2012 operating income, the revised revenue growth rate is 9.4%, which is basically close to the throughput growth rate. Overall, the company's annual revenue scale increased by about 10%, and the gross margin level (after considering the revised revenue growth rate) was basically the same. The increase in gross profit mainly depended on volume growth, but the increase in management expenses basically offset this part of the performance growth, and the final net profit was basically the same as the previous year. The main business lost money for the first time in the fourth quarter, and the return of port fees calmed fluctuations. Looking at the fourth quarter in a single quarter, the company's revenue fell 6.61% year on year to 392 million, and gross margin fell 4.36 percentage points year on year to 18.75%. Since investment income was also a net loss, operating profit lost for the first time in a single quarter, was -15.25 million. Ultimately, driven by the return of 26.5 million cargo port fees, net profit attributable to the parent company's shareholders fell 0.93% year on year to 14.89 million yuan, achieving an EPS of 0.02 yuan, the same as the same period last year. The contribution of coal increased by half, and the ore growth rate showed a slight bottleneck. Benefiting from the rapid growth rate of China's coal imports in 2012, the company's coal throughput increased by 22.93% year on year, and coal products contributed 57% of the increase in throughput; while iron ore was affected by the slowdown in domestic economic growth and the diversion from surrounding ports, the throughput fell 2.27% year on year; other rapidly growing products include laterite nickel ore (20.55%), alumina (164.63%), and machinery and equipment (60.67%). Production of the logistics terminal project was delayed, and “careful recommendations” were maintained. The company's future fundamental highlights mainly come from: 1) the improvement of the collection and evacuation system in the port area; 2) the expansion of the liquefied goods handling business; and 3) the development of the port industry in the hinterland. In the short term, due to the slow progress of the relevant demolition work, the completion time of the logistics terminal project in the Xugou East Operation Area will be delayed by 1 year until the end of 2013. Assuming that the performance contribution remains at the original level, we expect the company's EPS for 2013-2015 to be 0.21 yuan, 0.26 yuan, and 0.28 yuan respectively, and the corresponding PE is 15.34 times, 12.43 times and 11.74 times, maintaining the “careful recommendation” rating for the company.