Key investment points: 1. Incidents Premier **** of the State Council hosted an executive meeting of the State Council on June 11 to deploy the construction of the Yangtze River Economic Belt. The conference called for “improving the functions of the Yangtze River Golden Waterway”, “promoting standardization of inland waterway ship types, researching and promoting the Three Gorges ship types and ships that go directly to rivers and seas, and encouraging the development of energy-saving and environmentally friendly ships.” 2. Our analysis and judgment (1) Traditional businesses benefit from the construction of the Golden Waterway, and inland waterway ships subsidize the country's promotion of building the Yangtze River Economic Belt based on the Golden Waterway, which will raise navigation standards, promote standardized ship types, and develop energy-saving and environmentally friendly ships. The Ministry of Finance recently issued the “Administrative Measures on Inland Waterway Vessel Type Standardization Subsidy Funds”. According to information, the subsidy amount for some ship types reaches 30-50% of the cost of new ships; subsidies for LNG ships are even stronger. The company's market share of medium speed diesel engines for inland waterway shipping ranks first in the country. In the future, it will benefit from the construction of a golden waterway and the development of energy-saving and environmentally friendly ships; the recovery of the company's traditional business will exceed expectations. (2) Large aircraft orders for strategic new products are abundant, and future prospects are optimistic. In the first quarter, the company's strategic new product, high-power medium-speed diesel engines (large engines), received a total of 44.24 million yuan in new orders; at the end of the first quarter, large aircraft handhold orders of 410 million yuan. In 2013, the company received 450 million yuan of new orders for large machines and 390 million yuan for handheld orders. If we calculate the average price of 5 million yuan per unit, we judge that the company has orders for large machines in hand at the end of the first quarter for more than 80 units; the large machine manufacturing cycle is roughly around August-October, and we judge that the company will deliver more than 80 large machines this year, with an amount exceeding 400 million yuan. (3) The power generation equipment business is undergoing a comprehensive strategic transformation. There is great potential in the future, and the generator set market is in demand for long-range marine medium speed engines. The company vigorously expands the business of domestic and foreign high-power fuel and gas power plant markets. The competitor Zhonggao Heavy Industries brother company Zhonggao Power has ordered 3 billion yuan of overseas power generation equipment in recent years; the company's current executive general manager is the former general manager of Zhonggao Heavy Industries. (4) The second quarter ushered in a small peak in major delivery; performance is expected to accelerate the company's 13Q1-14Q1 revenue growth rate to -8%, 1%, 6%, 10%, and 30%; net profit growth rates are -44%, -40%, -44%, -47%, and 9%. The company's revenue growth rate was at an inflection point in the second quarter of 2013, and net profit was at an inflection point in the first quarter of 2014. The growth rate of the company's revenue was significantly higher than the growth rate of net profit. The company's large aircraft business benefits from official ships, offshore vessels, and pelagic fishing vessels. As a result of the second quarter of 2013, the company's strategic product, high-power medium-speed diesel engines, received a total of 225 million yuan in new orders. According to estimates of the large aircraft manufacturing cycle, it is expected that the company's aircraft business will receive high revenue growth in the second quarter in a single quarter. We judge that the company's large aircraft order expectations are optimistic, and that the second-quarter results will accelerate. 3. Investment recommendations The company's net interest rate in 2013 was only 1.7%. It may benefit from the reform of state-owned enterprises in Shandong Province in the future, and its performance is flexible. The 2014-2016 EPS is expected to be 0.35/0.52/0.75 yuan, PE is 24/16/11 times; maintain the “recommendation”. Risk warning: There is a risk that the large aircraft business falls short of expectations and the demand for inland waterway shipping will decline.