Key event description of the report Jiugang Hongxing released its 2015 annual report. During the reporting period, the company achieved operating income of 54.777 billion yuan, a year-on-year decrease of 42.79%; operating costs of 55.058 billion yuan, a year-on-year decrease of 37.92%; realized net profit attributable to the parent company -7.364 billion yuan, compared to 39 million yuan in the same period last year; and achieved EPS of -1.18 yuan in 2015. According to this calculation, the company achieved operating income of 14.282 billion yuan in the fourth quarter, a year-on-year decrease of 19.62%; realized operating costs of 12.591 billion yuan, a year-on-year increase of 3.92%; realized net profit attributable to owners of the parent company - 3837 billion yuan; achieved EPS-0.61 yuan in the fourth quarter, and an EPS of -0.32 yuan in the third quarter. In the first quarter of 2016, the company achieved operating income of 8.503 billion yuan, a year-on-year decrease of 55.30%; realized operating costs of 7.569 billion yuan, a year-on-year decrease of 57.35%; realized net profit attributable to owners of the parent company - 267 million yuan; EPS-0.04 yuan in the first quarter and 0.61 yuan in the fourth quarter of last year. Incident comments on the sharp decline in volume and prices combined with ore disadvantages, and significant losses throughout the year: the company's losses in 2015 reached 7.364 billion yuan, mainly due to the sharp drop in volume and price caused by the downturn in the industry combined with the drag on its own mines: 1) The steel industry continued to be sluggish in 2015, and the oversupply situation caused by overcapacity continued to worsen. The average price of rebar and wire in Lanzhou fell 27.48% and 25.23% year on year, respectively. Facing the deteriorating external environment, the company cut part of its production. Annual steel production fell to 7.5 million tons from 10.12 million tons last year to 7.5 million tons. width 25.88%; 2) The company itself has a concentrate production capacity of 5 million tons, and the average price of ore fell 36.71% year on year in 2015. Losses in the ore business were another major factor in the large loss in the company's performance; 3) The company's asset impairment losses increased 502 million yuan year on year due to the increase in the company's asset impairment losses of 502 million yuan, compounded by the increase in the company's US dollar loan exchange losses, which further exacerbated the loss situation. As far as the fourth quarter is concerned, although the company is actively expanding sales volume and removing inventory, the company's quarterly results continued to decline month-on-month due to the continued decline in steel prices. Benefiting from market recovery, first-quarter results reduced losses year-on-year: Benefiting from the month-on-month warming in the first quarter, the company's first-quarter performance improved markedly month-on-month, with a month-on-month increase in performance reaching 3,570 billion yuan. However, on a year-on-year basis, since steel prices in the first quarter still fell quite a bit year on year, the company still lost money in the first quarter, but the losses were reduced year over year. Expect the “Belt and Road” to contribute incrementally to the company's performance: Overall, the improvement in the company's profit is still hampered by insufficient industry prosperity, and subsequent substantial improvements in performance depend on the continued recovery of overall industry demand. However, the implementation of the “Belt and Road” plan has revealed the company's location advantage along the Silk Road, which is expected to accelerate the recovery of the company's performance. The company's 2016 and 2017 EPS are expected to be 0.02 yuan and 0.03 yuan respectively, maintaining the “increase in holdings” rating.