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Zhongyuan Securities Hu Zhuqiang

Refrigerator business started, and revenue growth improved. During the reporting period, the company's main business revenue reached 1.151 billion yuan, up 16.26% year on year, and the growth rate improved by 26Pt month on month. The contribution of refrigerator business is one of the very important factors for the company's revenue to recover positive growth. The company's refrigerator business achieved sales of about 200000 units in the first three quarters, which is not easy in the current market environment.

Refrigerator business has strong profitability and improved gross profit margin. The gross profit rate of the company's main business in the third quarter was 34.44%, an improvement of 0.86Pt year on year and 2.43Pt month on month. As it is currently in the market development period, in the third quarter, the capacity utilization rate of the refrigerator business was low and the fixed cost allocation was relatively high, but the company still achieved a high gross profit margin, indicating that the profitability of the refrigerator business was strong. In the future, with the improvement of refrigerator capacity utilization, the company's gross profit margin still has room for improvement.

The sales expenses increased moderately, and the period expense rate improved as a whole. In the third quarter, the company incurred sales expenses of 237 million yuan, with a year-on-year increase of 0.82Pt to 20.62%. At present, it is in the period of market development of refrigerator business, and the market investment is relatively concentrated. In the third quarter, the sales expense growth is relatively moderate, and the company's expense management is good. In the same period, the company's management expense ratio improved 1.33Pt to 3.78% year on year, and the financial expense realized a positive income of 880000 yuan, an increase of 131% year on year. The period expense ratio improved year on year.

Brand risk is reduced. On September 3, 2012, the Company signed the Amendment Contract of Trademark Use License Contract with Sanyo Co., Ltd. on the basis of the contents of Trademark Use License Contract signed by both parties on March 25, 2009. At the same time, the company has withdrawn the right to use the "Rongshida" brand, and the brand risk has been greatly reduced.

Refrigerator business is still the main focus in the future. The company aims to achieve the production and sales of more than 400000 refrigerators this year, about 200000 refrigerators in the first three quarters, and there is some pressure to achieve the goal in the fourth quarter. But overall, the promotion of refrigerator business is relatively smooth, and the financial pressure is controllable in the short term. If the current good trend can be maintained, it is expected that the refrigerator business is expected to achieve a break even or a small profit in 2013.

Maintain the company's rating of "overweight". It is predicted that the company's earnings per share in 2012 will be 0.64 yuan, and that in 2013 will be 0.75 yuan, corresponding to the dynamic P/E ratio of 10.08 times and 8.68 times respectively, maintaining the investment rating of "overweight".

Risk tips: 1. If the refrigerator business does not progress smoothly, it may drag down the company's profitability in the short term; 2. Political risks.

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