Investment highlights: The company recently released a performance report. In 2012, it achieved operating income of 325.9476 million yuan, a year-on-year decrease of 26.81%; realized net profit of 44,538 million yuan, a year-on-year decrease of 38.40%. Below our previous expectations for the company, our comments are as follows: sluggish downstream demand caused a large decline in performance due to the global economic slowdown and the relatively weak domestic economy. Demand for the company's main downstream shipping, construction machinery and power industries declined significantly, which directly led to a sharp decline in orders received by the company, and both revenue and profit fell; as the main downstream sectors were ships, construction machinery, etc., the recovery trend in the fourth quarter was still not optimistic. The company's performance in the fourth quarter did not improve, and the company's performance declined by more magnitude due to slow repayment of accounts receivable losses What we and the company expect. The current order cycle for the company has been shortened to 2-3 months, which is basically in line with the pace of production. The company is actively strengthening repayment control and fine management, such as promoting informatization construction, maintaining R&D investment, etc., and is actively promoting the construction of fund-raising projects to withstand the risk of declining main business. Fund-raising projects and offshore engineering will drive the company's performance to gradually improve. The company's 20,000-ton large-scale casting and forging project is expected to be put into operation soon, further catering to downstream demand for finishing and initially achieving vertical integration; the finishing project will bring orders from famous domestic and foreign companies to the company, saving its main business in the current declining trend. The company cooperates closely with relevant universities and other institutions in Zhejiang to improve processes and develop new products. Among them, the company's “Bearing seat forgings for offshore drilling platforms” project was included in the annual national torch plan. Through investment in R&D innovation, the company will continue to develop in the direction of product differentiation and competition. The company has obtained the weapons and equipment quality management system certification. It still needs to complete the “confidential qualification certification for weapons equipment research and production units” and the “weapon equipment research and production license certification”. Only after the three certificates are complete can the company accept military orders. Currently, the company is actively preparing, which will also have a positive impact on the stability of the company's overall performance. Valuation and investment recommendations The microfinance subsidiary is still awaiting approval. This will also be an important measure to lift the company's future performance out of the slump. The shipbuilding situation worsened further in 2013. The company still faced a difficult situation in the 13-year market. We lowered the company's 12-14 EPS to 0.30, 0.39, and 0.45 yuan, corresponding PE to 36, 27, and 24 times. The stock price is basically reasonable, maintaining an “increase in holdings” rating, and the target price is 11.7 yuan.