Company profile The company is the largest enterprise specializing in the production of color steel sheets for home appliances in the country. It mainly produces VCM coated color steel sheets, PCM painted color steel sheets, writing boards, etc., which are widely used in many fields such as household appliances, building materials, and daily necessities. It has formed an annual output of PET-PVC color film composite steel sheets and PCM color painted steel sheets reaching 5 million square meters. It has a series of stable domestic and foreign customers such as Samsung, Siemens, LG, Sharp, Panasonic, Sanyo, Hisense, Boss Electric, Midea, and Rongshida. The company has become one of the professional service providers with the most R&D strength and large-scale production capacity in the domestic home appliance composite materials industry, and is at the forefront of domestic professional manufacturers in terms of market size. Performance review of the third quarter report The company achieved annual sales revenue of 790 million yuan in the first three quarters of 2013, a year-on-year decline of -9.57%, and net profit attributable to the parent company of 29.86 million yuan, a year-on-year decline of -33.43%. Key investment points: With the launch of new products, an inflection point in performance is about to come. The industry-leading “printing PCM” production line will enhance the company's traditional business competitiveness: the company recently upgraded the existing production line, and the production line can produce “printing PCM” on the basis that it is compatible with both PCM and VCM. Printing PCM can realize the color patterns currently only VCM can produce, and can achieve small-scale customization. Currently, the cost of film used in VCM remains high (film cost is about equal to the cost of the substrate), so printing PCM will achieve the pattern effect of VCM and eliminate the cost of the film. The company is the first to print PCM in the industry and holds a patent (patent number CN 201531738 U). The high profit margin of PCM printing for new products can be expected. At the same time, printing PCM at a lower price than VCM may attract more orders. PCM/VCM growth depends on cross-industry applications: the company currently uses PCM, 95% of VCM for home appliances, but the PCM and VCM for decoration developed by the company will enter the building materials market as a replacement for exterior and interior wall tiles. Compared to traditional building materials, the cost is lower, and the patterns are richer. The company is also developing the use of PCM/VCM as a wall covering for overall kitchen and bathroom. The new product SUSLIKE will enrich the company's product line and greatly increase the company's profit level. Another innovative product of the company is SUSLIKE, which imitates stainless steel. The appearance of SUSLIKE and stainless steel products can be consistent, and compared to stainless steel products, SUSLIKE colors can be diversified. Stainless steel is easily fingerprinted, and SUSLIKE does not leave fingerprints. In terms of service life, SUSLIKE can also last 10 years or more. From a cost point of view: SUSLIKE uses custom galvanized sheet processing. Currently, the cost is about 6,000/ton, which is a great advantage compared to the cost of stainless steel of 10,000/ton. From a pricing point of view: stainless steel products 80-110 square meters. SUSLIKE will refer to the pricing of stainless steel, which is a certain percentage cheaper. The gross margin of the new product will be significantly higher than that of the existing product. SUSLIKE has been certified by Siemens and Samsung, so orders can be expected. Profit forecast and valuation: The company's 2013-2015 EPS is expected to be 0.1 yuan, 0.15 yuan, and 0.23 yuan respectively. We believe that the company's new products have strong competitiveness and performance growth can be expected, but orders will not be released until next year. Therefore, an investment rating of “recommended” is given.