The company's operating income in 2012 was 1.614 billion yuan, down 2.88% from the same period last year, and the net profit attributed to the owner of the parent company was 44.54 million yuan, down 68.6% from the same period last year, lower than expected. The company's revenue decline is mainly due to increased competition in the industry, transportation equipment business revenue and gross profit declined significantly, while the company's expenses rose, net profit fell sharply. The company has recently established an aero-engine and drone company, which has officially entered the military industry. as this project can not contribute profits in the short term, we expect the company to earn 0.14,0.16 yuan per share in 2013 and 2014, respectively. Based on a price-to-earnings ratio of 47 times 2013 earnings, we raised our target price from $5.60 to $6.46, maintaining our holding rating.

Support the main points of rating

The company's revenue from supporting equipment increased rapidly, reaching 21.13%, which was related to the adoption of major customer marketing strategy for support products, while the traditional conveying equipment decreased significantly, with revenue down 18.5% year-on-year and gross profit margin down 2.5 percentage points. Led the overall machinery manufacturing business gross profit margin decreased by 1.43 percentage points.

During the reporting period, the company's sales expenses increased by 15.98%, mainly due to the increase in equipment installation costs, reflecting an increase in company expenses in response to fierce competition. Management expenses increased by 35.42%, mainly due to R & D expenditure on new products and military projects.

The company announced the establishment of an aero-engine company and a drone company, officially entering the military field. There are already engine orders, and some revenue is expected to be recognized this year, but it does not contribute much to performance and is expected to be released after 2015.

During the reporting period, the "key customer strategy" achieved initial results, and the joint venture between the company and Pingping Coal Shenma began to bring orders to the company, which is expected to continue to grow this year.

In 2012, the company has successfully obtained the coal safety certificate of the mine rescue capsule, and accelerated the market expansion, at the same time successfully developed the refuge chamber and realized the sales.

Main risks faced by rating

The macro-economy remains in the doldrums, the risk of a slowdown in coal demand.

Valuation

The company has recently established an aero-engine and drone company, which has officially entered the military industry. as this project can not contribute profits in the short term, we expect the company to earn 0.14,0.16 yuan per share in 2013 and 2014, respectively. Based on a price-to-earnings ratio of 47 times 2013 earnings, we raised our target price from $5.60 to $6.46, maintaining our holding rating.