This report is read as follows:

The company plans to grant 216 million restricted shares to 1230 incentive targets at a price of 4.29 yuan per share, with the first and second unlocking periods of 12 months and 24 months respectively.

Main points of investment:

Maintain the "overweight" rating. Maintain the company's EPS forecast of 1.3,1.33,1.34 yuan from 2021 to 2023, maintain the company's target price of 11.42 yuan, and maintain the "overweight" rating.

High proportion of restricted stock incentives hit the ground. The company announced that it intends to grant 216 million restricted shares to 1230 incentive targets, accounting for 10% of the company's current total share capital, reaching the upper limit of equity incentives. The proposed award price is 4.29 yuan per share, which accounts for 16.47% of the total number of employees of the company based on the total number of employees of the company in 2020. The incentive is unlocked in 12 and 24 months, and the unlocking conditions are as follows: the weighted average return on equity at the company level in 2022 and 2023 is not less than 20% and not lower than the 70 quantile level of the target company; the personal score at the individual level is higher than 60 points (inclusive). We believe that a high proportion of restricted stock incentives will strengthen the benefit sharing between employees and the company, and further improve the internal governance structure of the company.

Equity incentives continue to be carried out, and the ability of operation and management continues to improve. The company conducted equity incentives in 2012 and 2018 respectively, and the total number of incentive stocks accounted for 10% and 9.33% of the total share capital of the company at that time, respectively, and the incentive period was 5 years and 3 years respectively. The company's equity incentive policy is consistent, which effectively solves the problem of "who to work for". The company's management ability continues to rise, and the cost control ability continues to lead the iron and steel industry.

The company passes through the cycle through a low-cost expansion strategy. At present, the growth logic of iron and steel industry or company has been switched to the endogenous growth of individual "fine management to reduce cost". The company adopts a unique low-cost expansion strategy to achieve capacity expansion and value creation through continuous output management through epitaxial mergers and acquisitions. We believe that the company's production capacity and performance will achieve fluctuating growth.

Risk tips: a sharp macroeconomic downturn; unpredictable safety accidents.