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First quarter sales revenue maintained a relatively high growth rate, and net profit slightly exceeded market expectations. In the first quarter, the company achieved sales revenue of about 180 million yuan, an increase of 25% over the same period, and a decrease of 28%. Gross profit margin and net interest rate increased by 0.26 and 0.22 percentage points respectively, pushing net profit growth higher than income growth.

Although the decline in real estate investment growth, but the company's stainless steel pump business is still growing steadily. It is understood that the proportion of real estate investment demand accounts for about 30% of the total demand for the company's products. The weak real estate investment in the second half of the 11 year has a certain impact on the company's operation, but the first quarter of the company still maintains a high growth rate. We think the main reason is: (1) the product structure is optimized. The proportion of frequency conversion water supply equipment and large flow pump sales increased further, and promoted the overall revenue growth; (2) the sales network strengthened, and the market share increased further. After the company is on the market, the company further strengthens the sales network and expands the sales staff, which lays the foundation for the further promotion of the product, and is beneficial to the company to obtain a larger market share.

The 12 year's performance is relatively high. In the next few years, the water conservancy business is expected to be an important growth pole. With the strengthening of its own sales and service network, the import substitution of the company's products in the past 12 years is expected to maintain high speed, and the annual profit or earnings growth will remain relatively high. In addition, the development of Changhe pump business sector is larger, and it is expected to benefit from water conservancy investment in the future.

The operating income of the company in 2012 and 2013 is expected to be 1 billion 100 million and 1 billion 400 million, respectively, and the earnings per share are 0.82 yuan and 1.05 yuan respectively. The PE for April 25th closing price is 20 and 16 times respectively. Taking into account the high certainty of the company's growth this year, we maintain the "recommended" rating.

Risk suggests that the traditional stainless steel pump industry competition intensified, leading to the company's gross margin decline; water business sector growth is lower than expected