This report is read as follows:

2022H1's performance has been adversely affected and declined. The company is a leading steel enterprise in Fujian, with excellent management ability. We believe that with the rise in raw materials, weak demand and other adverse factors gradually improve, the company's performance will pick up again.

Main points of investment:

Maintain the "overweight" rating. In the first half of 2002, the company realized revenue of 26.641 billion yuan, down 14.29% from the same period last year; the net profit of returning to the mother was 457 million yuan, down 83.26% from the same period last year, and the performance was slightly lower than expected. Considering the impact of the rise of raw materials and the epidemic situation on demand, the company's EPS in 2022-24 is estimated to be 0.56 shock 0.63 yuan (the original 1.68 pound 1.71 plus 1.76 yuan), and the corresponding return net profit is 13.74 billion yuan respectively.

Taking into account the rise in raw material prices brought about by the plate valuation adjustment, with reference to similar companies to give 22 years 13 times PE valuation, downgrade the target price to 7.28 yuan (the original 10.08 yuan), maintain the "overweight" rating.

Unfavorable factors will improve month-on-month, and performance is expected to pick up again. The price of raw materials rose in the first half of the year, and under the influence of the superimposed epidemic, demand was weak, profits of Pu Steel enterprises generally declined, losses and production were reduced more. 2022H1's steel output was 5.37 million tons, down 12 percent from the same period last year, and its gross profit margin was 7.43 percent, down 4.87 percent from the previous year. In the context of steady growth, demand is still expected to make up for growth in the second half of the year. We expect the adverse effects of rising costs and weak demand to gradually ease, and the company's performance is expected to pick up again.

Increase investment in environmental protection and enhance the ability of sustainable development. 2022H1 has invested a total of about 549 million yuan in environmental protection, and carried out environmental protection upgrading and renovation throughout the year, effectively improving its own ability to control and control pollution. In the first half of the year, the synchronous operation rate of the company's environmental protection facilities reached 100%, realizing the long-term and stable discharge of pollutants.

In the context of double carbon, the company increases investment in environmental protection, which is conducive to the company's long-term sustainable development.

Participation in Xiamen tungsten Xinneng will benefit from the high landscape demeanor of lithium-ion batteries. On August 18, 22, the company completed the subscription of 5597537 shares of Xiamen Tungsten Xinneng for 400 million yuan; after the subscription was completed, the company held 1.86% of Xiamen Tungsten Xinneng shares. Xiamen Tungsten Xinneng raised a total of 3.5 billion yuan, mainly for its lithium-ion battery material expansion project. In the future, the company is expected to benefit from the high prosperity of lithium-ion batteries.

Risk hint: the macro-economy is down sharply; the demand for steel is not as good as expected.