The main business continued to suffer losses in the second half of 2012, but the magnitude was drastically reduced. However, positive signals include 1) the continuous increase in slaughter volume over month. We expect the slaughter volume in the second half of 2012 to have increased to 6.97 million heads, up 6% year on year, and 13.61 million heads for the full year of 2012, but down 11% year on year compared to 2011. 2) However, we expect gross margin to gradually return to 4.5% for 12 years. As a result, we expect losses from main operations to increase to HK$681 million. 2013- Beginning of reversal: We expect slaughter volume to increase by 20% in FY13, and gross margin to return close to FY11 levels in the second half of '13, based on 1) continued slaughter volume and a quarterly recovery in gross profit, 2) sales channel development (such as penetration into restaurant channels) and direct sales channels for major customers, 3) increased macro-environment and demand, and 4) increased macro-environment and demand, and 4) integration of pig farming and slaughter businesses. The improvement in the supply and demand environment for raw pigs, along with a slight increase in prices, is beneficial to Yurun Food's revenue expansion. Due to seasonal factors, pig prices and pig price returns are already quite clear on the retail/wholesale side. We expect raw pork and pork prices to remain strong for most of 2013 (we expect a slight return in the second quarter after the Lunar New Year) based on a better relationship between supply and demand. Focusing on the company's development over the next three years, the slaughter volume reached 30 million heads in fiscal year 2015. We obtained the slaughter volume of 30 million heads in fiscal year 2015 through two methods: 1) Based on the volume of live pig procurement based on related transactions with the parent company, we found that the parent company's upstream slaughter capacity reached 10 million heads by 2015, and that Yurun Foods' procurement volume for the 2015 fiscal year was about 4.5 to 5 million heads, so it can be seen from this that the total slaughter volume of Yurun Foods will be no less than 30 million heads. 2) Management's expectation that the 2015 butchery capacity utilization rate will reach 60% also supports our point of view, even if we assume conservatively that the design capacity will only reach 60 million heads in fiscal year 15 (target is 70 million heads) and that the capacity utilization rate is 50%. The slaughter production of 30 million heads corresponds to the compound growth rate of slaughter volume of 30% in the 13-15 fiscal year. The utilization rate of slaughtering production capacity will increase: Yurun's expansion of slaughter capacity is driven by long-term integration of the industry, but the cost is the erosion of gross profit due to low short-term capacity utilization (31% in the first half of 2012) and higher fixed costs (depreciation). In the next three years, as capacity utilization will gradually increase and scale effects will begin to be seen, we expect gross margin to return to the level of fiscal year 11. Therefore, we expect that if the company continues to execute its expansion plans, a high compound growth rate and revaluation can be expected. Valuation and target price: We maintain our point of view as the current double bottom of valuation and profit for long-term investors. Although we will record losses in 2012, we believe that the profit margin will be reduced in the second half of '12, and the company will turn a profit in the first half of '13. We have revised our earnings per share forecast for the 12-14 fiscal year to HK$0.18/0.41/0.63 to reflect the decrease in assumptions supported by the government. We maintain our Overstock Rating. The company's current stock price corresponds to a price-earnings ratio of 14 times in '13 and 0.7 times a net price-earnings ratio of 0.7 times in '13. The risk of poor profit in '12 and corporate governance is already reflected in the stock price. Key hypotheses: 1) The average pig price increased by 5% in fiscal year 13; 2) the slaughter volume growth rate increased to 20%, gross margin rebounded to 7.3% in '13 (8.6% in '11), and other income fell 50% year over year as production capacity expansion slowed. Stock price catalysts: The space for revaluation will come from a continuous increase in slaughter volume and recovery in gross profit. Other positive catalysts include stabilizing pig prices under sufficient supply, further increases in holdings by management and major shareholders, and control of slaughter licenses. Risks: The pace of recovery is slow, pig prices are rising rapidly, and corporate governance issues