Key investment points: High-speed rail brake pads may become a new profit growth pole for the company. In the field of high-speed rail brake pads, the company has basically completed the early R&D and manufacturing process, and has also obtained CRCC certification. In the next year, the company will speed up the last hurdle before mass production of high-speed rail brake pads — loading tests. We expect the company to industrialize high-speed rail brake pads as soon as the first quarter of 2017. It is conservatively estimated that in the first year of entering the brake pad market, the company will receive a market of 50-70 million yuan; by 2018, the company is expected to obtain 10% of the brake pad market, or about 600 million yuan in revenue; in the future, it is expected to reach about 20% in 2020. The company's high-speed rail brake pads have broad prospects for development, and they may become a new driving force for the company's growth in the future. The traditional diamond tool industry is shifting from midrange to high-end and from domestic to overseas in the diamond tool field. The company is seeking a transformation of products from mid-range to high-end, as well as the transformation of key market regions from domestic to foreign. Facing the decline in domestic demand and falling profit margins, the company is targeting the high-end diamond tool market by setting up a research and development center in South Korea. It is expected that the company's gross profit for high-end diamond tools will increase to between 40% and 50% in the future; at the same time, the company is actively expanding sales in overseas markets to hedge against the decline in domestic market demand. This series of measures may improve the company's profit situation in 2016. Investment suggestions and profit forecasts are based on the above analysis. We have been optimistic about the company's development for a long time, covered for the first time, and gave the company a “buy” investment rating. We expect the company's 2015-17 EPS to be 0.05, 0.08, and 0.45 yuan/share, respectively, and the corresponding PE will be: 203X, 127X, and 23X, respectively. Considering the broad market space for high-speed rail brake pads, the company has huge potential for future development. We gave the company a PE level of 40-50 times that of 2017, with a corresponding valuation of 18-22.5 yuan/share; from a longer-term perspective, we gave the company 60-70 times the PE level, and the corresponding valuation was 27-31.5 yuan/share.