Report for the third quarter of 2016: The company increased losses in the first three quarters. The company achieved operating income of about 678 million yuan in the first three quarters, down 13.78% year on year; net profit attributable to the parent company - 90 million yuan, down 0.26 million yuan; basic earnings per share - 0.18 yuan, down 0.05 yuan; and weighted average return on net assets -5.03%, down 1.84 percentage points from the previous year. Among them, the third quarter achieved operating income of about 202 million yuan, down 23.95% month-on-month and 7.35% year-on-year; net profit attributable to the parent company was -41 million yuan, down -13 million yuan, down -01 million yuan from the previous year, corresponding to basic earnings per share of -0.08 yuan, down 0.03 yuan from the previous year, and the same level from the previous year. There were some positive changes in the third quarter results. The increase in gross margin in a single quarter clearly showed that the company lost money in the first three quarters, mainly due to a 13.78% decline in revenue. At the same time, there were some positive changes in the company's performance in the third quarter. For example, the gross sales margin for the third quarter reached 13.45%, up 1.66 percentage points from the previous month, up 9.26 percentage points from the previous year, and the gross sales margin for the first three quarters reached 10.24%, up 1.11 percentage points from the previous year. The company's weak performance is related to sluggish drilling and oil and gas pipeline construction due to fluctuations in low oil prices. Looking at the first half of the year, the company's oil drilling tools and power limit core revenue decreased by 56.7% and 69.6% year on year, respectively. In addition, the company's long-term loans increased by 134 million yuan from the beginning of the year, an increase of 55.39%, which led to a 161.80% increase in financial expenses in the first three quarters. The layout of the global sales market hedges the decline in domestic performance. In the context of declining domestic macroeconomic growth, the company actively lays out overseas marketing networks and implements major customer strategies. The company's overseas office operations 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. A major breakthrough was achieved after the company's high clean steel project was put into production. Some products achieved batch orders and received batch orders. Key products such as P91, H13 and wind power gear steel were supplied in batches. H13 continuous casting blanks were introduced into Baosteel Special Steel for the first time, and the promotion of medium and low alloy steel continuous casting billets instead of steel ingots achieved results. It has already been tested in 15 forging factories, forming batch orders. It is hoped that the company's plight will reverse. The company has maintained its “increased holdings” rating and 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, mandrel and other products rely on oil price levels and drilling and pipeline construction. Oil prices rebounded in the first three quarters but were still low year on year. It is speculated that subsequent oil drilling and pipeline construction will continue to be sluggish; some of the company's high-clean steel projects made a breakthrough in the early stages, and some products began to be supplied in batches, becoming a new growth point for the company's performance, maintaining the “increase in earnings” rating. The 2016-2018 EPS is expected to be 0.01, 0.02, and 0.03 yuan respectively. Risk warning: changes in the economic situation; fluctuations in raw material costs and product prices; corporate management governance, etc.