The incident described the company's 2016 annual report. In 2016, the company achieved revenue of 7.585 billion yuan, an increase of 3.10% year on year; net profit to mother of 220 million yuan, an increase of 372.87% year on year; and achieved basic income per share of 0.1 yuan. At the same time, the company predicts a net profit of 805-110 million yuan in the first quarter, an increase of 2018%-2640% over the previous year. Incident Review [1] Cost reduction has been significant, and gross profit has reached a new high. The company vigorously carries out activities to reduce costs, innovate and explore potential efficiency gains. Focusing on production, the overall cost of products is reduced through raw material ratio, product structure, process parameters, energy consumption, etc. In an environment where raw fuel prices were high in the second half of 2016, through research and judging trends and strengthening supplier communication and cooperation, the company's raw material cost for a ton of steel was only 1,128 yuan, and the fuel cost for a ton of steel was only 730 yuan, all at a low level in the industry. In the context of industry improvements, the company achieved good results in reducing costs and increasing efficiency. The gross margin of high-quality steel, steel billets, pipeline steel, spring steel, bearing steel, etc. all reached the highest level in history in 2016. [2] Efficient operation and steady performance. The company's three expenses did not fluctuate much. Management expenses increased by 2.85% year on year, but sales expenses decreased by 6.16 year on year. The total cost of the three items is 291 million yuan. The three expenses account for only 3.84% of revenue. Compared with industry companies that have already issued annual reports, such as Jiugang Hongxing, Nangang Steel Co., Ltd., Daye Special Steel, etc., they are absolutely low. Looking at the past few years, the company's three expense rates have always been low in the industry, such as 3.95% in 2015, 3.77% in 2014, and 4.04% in 2013. Through efficient management, the company has achieved steady development. Thanks to the recovery and explosion of construction machinery and infrastructure in the first quarter of 2017, the year-on-year increase in performance was more than 2000%, and the boom continued, which is expected to greatly support the company's performance. [3] Transformation is urgent, and upgrading is in sight. The company plans to acquire IDC assets. After the acquisition is completed, the company will transform from a single special steel manufacturer to an enterprise where the two main industries of steel and data centers develop collaboratively. [4] Investment advice: The company's net profit for 2017-2019 is estimated to be RMB 3.11, 3.41, and RMB 372 million; EPS is 0.14, 0.15, and 0.17 yuan, respectively. The P/E corresponding to the current stock price is 114.56X, 104.42X, 95.65X. Accumulation rating. [5] Risk: Downstream demand is sluggish, and transformation and development have not met expectations.