Lower than expected earnings in 2008: China Fiberglass, today announced the 2008 annual report. In 2007 the company achieved operating income of 4.008 billion yuan, up 25.23 percent; operating profit of 610 million yuan, down 13.35%; attributable net profit of 244 million of listed companies, down 18.87 percent, retrace eps0.57 yuan, lower than our expectations. Company's profit lower than expected fourth quarter is mainly due to the rapid decline in profitability and trading of financial assets losses.

Weak demand, a substantial decline in profitability in the fourth quarter: With the global macro-economic growth slows, demand for glass products, were greatly affected. 2008 sales of fiberglass fabric and related products 580,000 tons, lower than we expected about 15%. In November, the company conducted a major fiberglass fabric prices drop nearly 10% increase. Therefore, the four quarter alone, the company's consolidated gross profit margin slipped to 20.5%, while the three-quarter one-quarter of 35.43%. The full year gross margin of fiberglass fabrica , 32.58%, down 0.88 percentage points more than in the first half fell 2.69 percentage points.

The end of 2008, the company stock commodity 724 million yuan, rose by 7.6 times. 2008 rock group net profit of 667 million yuan, an increase of 11.32%.

Highlighting financial pressure, trading gains and losses drag on earnings of financial assets: Due to the continued expansion of production capacity, the financial cost pressures highlighted in 2008, the company's financial costs of 332 million, an increase of more than 100%. 2008 operating cash flow -4.57 billion, operating cash flow per share -1.07 yuan, down 175.59%.

2007 companies to invest in Tianwei change security transactions such as financial assets for the company contributed 68.08 million yuan of net profit, and since 2008 the stock market Shenfutiaozheng, trading financial assets, a loss of 38.12 million yuan upside down. Although the transfer of Building Material Investment Co., Ltd. company's stake in a return 19.29 million yuan, and the government subsidy year on year revenue increase of 46.15 million yuan, but the gains and losses on trading financial assets are still unable to compensate for the impact.

Industry lead outstanding waiting for the bottom of the pick-up: in 2008 the Group of new capacity is 380,000 tons rock end of the year's total capacity to crack the 90 million tons, as the world's largest fiberglass production company. Advantage of the company's economies of scale is very prominent, is the industry's lowest unit consumption products company. We believe that, although the degree of glass fiber industry, is currently in the bottom of the economy, but with the macro-economic recovery, demand for glass fiber will be gradually picked up at the bottom. 2009 fiberglass fabric in the field of wind power and the expressway will have a significant improvement in sales. We expect that this year sales of 750,000 tons fiberglass, consider the contribution of stock returns are expected this year's eps at 0.68 yuan, 2010 and 2011, without regard to security returns, expects eps were 0.91 yuan and 1.27 yuan. Taking into account the industry at the worst of times and asset injection expectations, we adjust the company's rating to "overweight-B", 6-month target price of 20 yuan, inventory digestion cause for concern.