Potential risks: The prices of steel coil, an upstream industry of functional organic coated sheet industry, and the demand from the downstream industries are both cyclical and influenced by fluctuations of macro economy. After the expansion of capacity, the company still needs to improve its sales and exploit markets for its new capacity.

Earning forecast and valuation. We expect the company’s 2011/12/13E EPS (diluted) at RMb0.74/Rmb0.63/Rmb1.23. With the gradual release of new capacity, the company’s results in 2013E will be much improved compared with that in 2012E. Besides, given the advantage of low debt ratio, we adopt the absolute DCF valuation of Rmb13.9 (close to the median of PE valuation range Rmb12.6-Rmb15.12) as the company’s fair stock price, equivalent to 22X 2012E PE.