2016 Interim Report: The company's performance increased or lost in the first half of the year. The company achieved revenue of 476 million yuan in the first half of the year, down 16.24% from the previous year; net profit attributable to the parent company - 49 million yuan, down 225 million yuan from the previous year; basic earnings per share - 0.10 yuan, down 0.05 yuan from the previous year; and the weighted average return on net assets was -2.71%, down 1.52 percentage points year on year. Among them, the second quarter achieved revenue of 265 million yuan, a year-on-year increase of 25.64% and a year-on-year decrease of 6.87%; net profit attributable to the parent company of -28 million yuan, a decrease of 0.07 million yuan and a year-on-year decrease of 16 million yuan; and basic earnings per share of -0.05 yuan, a decrease of 0.01 yuan and a year-on-year decrease of 0.03 yuan. The decline in company revenue dragged down the company's performance and the company's sharp year-on-year increase in losses in the first half of the year, mainly because revenue fell by 16.24%, and the reduction in operating costs fell short of the decline in operating income. Product gross margin was only 8.98%, down 2.42 percentage points from the previous year. By product, sales revenue for large special steel precision forgings increased 3.80% year on year; sales revenue for industrial special equipment fell 40.04% year on year. Among them, revenue from petroleum drilling tools and power limiting mandrel fell 56.7% and 69.6% year on year respectively, mainly affected by low oil prices, sluggish drilling and oil and gas pipeline construction, and a decline in demand for related products. Furthermore, in the first half of the year, the company's interest-bearing liabilities, handling fees and other items increased year on year, leading to a 56% year-on-year increase in interest expenses and a 140% year-on-year increase in financial expenses. Maintaining the advantages of high-end products and laying out the global sales market. In the first half of this year, on the basis of continuing to maintain the position of petrochemical and CNPC strategic suppliers of petroleum drilling tools, five drilling tool products successfully entered the CNPC Class A supplier list. The market share of core rods and pipe molds continued to be among the highest in the country, the market share of surface-welded mandrel products was further expanded, the scale of production and sales of wind turbine spindles was further increased, and mold steel products entered the Changan Automobile sector, and the company's product market influence expanded. In terms of product sales, the company insists on implementing a marketing strategy for major customers and actively lays out overseas marketing networks. The company's overseas offices in Europe, Singapore, and South Korea have seen initial results, signed trial orders with North American casting pipes, and achieved sales of mold steel in Singapore and South Korea. Major breakthroughs were made after the high-purity project was put into operation. The company made a major breakthrough in technological development and market development of the high-purity project, and production organization and management were improved more and more. Key products such as P91, H13, and wind power gear steels are supplied in batches, and P91 continuous casting blanks have formed cooperation with leading domestic high-pressure pipe manufacturers, reaching the advanced level in China. H13 continuous casting blanks have entered Baosteel in batches for the first time, and wind power gear steel has formed cooperation with enterprises in Chongqing, Zhejiang and other places. Actively promoting the application of medium and low alloy steel continuous casting blanks to replace steel ingots, testing has been carried out at 15 forging factories, and batch orders have been formed. It is expected that the high-clean steel project will release profits, maintain the “increase in holdings” rating, and that the company has lost money for two years in a row. There is no time to delay reversing losses throughout this year. The company's oil drilling tools, restrictive core rods and other products rely on oil price levels and pipeline construction. Oil prices rebounded in the first half of the year but were still low year on year. It is speculated that oil drilling and pipeline construction will continue to be sluggish in the second half of the year; in the first half of the year, the company achieved a certain breakthrough in high cleaning projects, expanding the market space for wind power gear steel and continuous casting products, becoming the company's new performance growth point and maintaining the “increase in holdings” rating. The 2016-2018 EPS is expected to be 0.01, 0.02, and 0.04 yuan/share, respectively. Risk warning: changes in the economic situation; fluctuations in raw material costs and product prices; corporate management governance, etc.