Investment highlights On February 7, the company released its 2012 annual report: In 2012, the company achieved operating income of 619 million yuan, net profit attributable to listed companies of 9.95 million yuan, net profit after deduction of net profit of 85.49 million yuan, and net cash flow from operating activities minus 62.11 million yuan. Comment ※Performance exceeded expectations: The company's operating income increased 15.26% year on year, exceeding our expectations by 9.14%, and even more than the market's unanimous expectations; in 2011, the company's net profit was a loss of 184 million yuan, and net profit after deduction was a loss of 222 million yuan. There was a significant improvement over the previous year in 2012, all of which exceeded our expectations and those of the market. ※The net cash outflow from operating activities has declined sharply, and the operating results have improved: the company's net cash flow from operating activities in 2011 was negative of 264 million yuan, and the net outflow in 2012 decreased by more than 200 million yuan over the same period last year, indicating that the company's operating situation is healthier and indicates that the company is gradually entering a benign development path. Sales expenses and management expenses decreased by 9.59 and 7.33 percentage points, respectively, over the same period last year, indicating a significant improvement in the company's management level. ※The company's finished wine sales revenue increased by 28%, and the marketing system construction progressed smoothly: The company's main wine business sales revenue in 2012 was 397 million yuan, down 14.3% from the 463 million yuan in 2011, but the finished wine sales revenue increased by 28%. In the face of the severe overall situation in the wine industry last year, it further highlights the company's effectiveness in building sales channels. We believe that the overall decline in the company's wine revenue may be due to the company's expectations and confidence that it has opened up its own finished wine sales channels, while the industry situation is poor, and other companies are less motivated to purchase base wine from the company. Since the profitability of base wine sales is far lower than that of finished wine, the gross margin of alcohol sales in 2012 increased by 12 percentage points over the same period last year. ※The sale of assets into profit reflects the strengthening of the company's marketization: the company sold assets in the fourth quarter to achieve a profit of more than 79 million yuan, which contributed greatly to the company's turning losses into profits. We believe that revitalizing assets on the one hand improved the company's economic efficiency, and on the other hand, focused on the main wine business, while also laying the foundation for the company's steady operation, reflecting the company's market-based concept; in addition, this annual report also provides a lot of detailed information not available in previous years. It reflects the company's positive attitude of connecting with the capital market, all of which are conducive to safeguarding the interests of investors. ※Future stock price catalyst: The company's channels and brand building are progressing smoothly, and the product is recognized by the market. ※Profit forecast and rating: Considering the explosive growth of the company's performance in the fourth quarter, the improvement in product quality, and the smooth development of marketing construction, the company is expected to earn 0.02, 0.05, and 0.07 yuan per share in 2013-2015, maintaining the company's “increased holdings” rating.