On the evening of February 27, Danhua Technology released its 2012 annual report. In that year, it achieved sales revenue of 1.102 billion yuan, an increase of 97.8%; net profit of 27.75 million yuan, turning a loss into a profit. Brief review of ethylene glycol achieved volume production and sales. Technological breakthroughs first saw results. In 2012, the company produced and sold about 100,000 tons of ethylene glycol and nearly 50,000 tons of oxalic acid. The comprehensive operating rate reached 63%, and the year-end load reached more than 85%. Considering that the problem of continuous production and light transmittance of ethylene glycol was mainly solved in the fourth quarter, and compared with the third quarter, the accounts receivable and inventory items were basically stable. It can be initially assumed that the company achieved volume production and sales of ethylene glycol. We believe that the company's coal-to-ethylene glycol process has basically achieved a breakthrough at the technical level. Ethylene glycol sought sales volume at a discount in 2012. Looking at the company's ethylene glycol sales situation, it can be found that in 2012, the company achieved an average price of 5,961 yuan/ton of ethylene glycol, which is lower than the average price of ethylene glycol of 6,647 yuan in 2012 (the market price of ethylene glycol was higher in the second half of the year). It can be seen that sales of the company's products were achieved through a strategy to occupy the market at a discount. Looking at the cost structure, the average cost of ethylene glycol per ton is 5,658 yuan/ton. In the cost structure, raw materials (mainly coal+catalyst) are about 3,000 yuan, and depreciation+others (should be repairs, etc.) account for the main proportion, which is basically consistent with our previous report estimates. The three major challenges in 2013: improving the cost structure, stabilizing the operation of the device, and obtaining downstream approval. We believe that the company's main challenges in 2013 are three: one is to reduce costs by introducing cheap raw materials and expanding production through technological improvement. We estimate that the cost can be reduced to 1400-1,600 yuan. On the one hand, the company is trying to find cheaper raw materials for lignite. On the other hand, the company's annual report also plans to invest 300 million yuan in 2013 to expand the 200,000 ton plant in Tongliao to 300,000 tons, so the ton depreciation is expected to be reduced by 4-500 yuan/ton under full production conditions. The second is to stabilize the operation of the device. Although the company's core technical problems with ethylene glycol have been broken through, engineering problems such as long-term operation of the device and stable product quality may take some time to debug and accumulate. Third, at present, the company's products are still achieving sales volume through discounts. In particular, downstream polyester companies are still in the product trial stage. Considering the important impact of ethylene glycol quality on the PET synthesis process and product quality, it is expected that downstream approval will take a period of time (we expect at least half a year).