Incident: On October 30, 2015, Xining Special Steel released its 2015 three-quarter report. The company achieved operating income of 3.76 billion yuan, a year-on-year decrease of 14.28%; net profit attributable to shareholders of listed companies - 507 million yuan; and basic earnings per share - 0.68 yuan, lower than our expectations. Comment: The fundamentals of the industry have not improved, and product gross margin has declined. Domestic economic growth slowed in the first three quarters of 2015, demand from downstream industries shrank further, and competition within the industry intensified. The company was affected by the sluggish external economic situation, falling steel prices, and insufficient demand in the downstream market. Product prices continued to drop. Revenue in the third quarter was 1,388 billion yuan, down 9.12% year on year. Since 2015, the prices of the company's main products, steel, iron powder, and coke have been affected by the market, continuing the downward trend since last year. Sales volume has shrunk, and profits have declined. The company's net profit loss for the third quarter was 287 million yuan. The company expects that the cumulative net profit until the end of the next reporting period may be a loss. The profit and loss of minority shareholders fell sharply by 134.8% in the third quarter. Mainly, the holding subsidiaries Subei Bolun Company and Jiangcang Energy Company achieved reduced profits in the current period. The private issuance failed, and financial pressure increased. The company's 13- and 14-year fixed increases have all failed. Due to the progress of the company's transformation and upgrading projects, capital demand pressure is high, and the balance ratio continues to increase due to the failure of the non-public offering process. In 2014, the company's balance ratio increased to 84.58%, up 5.18 percentage points year on year; financial expenses increased 17.42% year on year. In 2015, the company expects the capital requirements of the headquarters to be 762 million yuan for technical reform, 168 million yuan for the subsidiary Bolun Mining, and 268 million yuan for Jiangcang Energy. The above funds are mainly solved through operating repayments and bank loans. The financial expenses are high, and the financial pressure is still very high. Real estate contributions have shrunk drastically. In the real estate sector business, in order to guarantee profits in 2014, the company acquired 100% of Xigang Real Estate's shares, and this sector became the company's main source of profit. However, the real estate business's contribution to the company's performance has been greatly reduced this year, and revenue has dropped sharply by 35%, or more than 40 million. We expect real estate revenue to be around 80 million in 2015. Profit forecast and rating: The growth in steel demand was still limited in 2015, making it difficult to change the industry's overcapacity and difficult operations. We expect the company's EPS to be -0.35 yuan, 0.01 yuan, and -0.10 yuan in 15-17. Given that the company is in a period of transformation and upgrading and has an integrated layout from “coal, iron ore, and steel,” it will maintain the company's “gain” rating. Risk factors: China's economic growth is slowing, and downstream demand for special steel products is slowing; steel prices continue to be low; prices of raw materials such as iron ore and coke have risen sharply; anti-dumping investigations in overseas countries affect exports of special steel products; and financial pressure continues to increase due to bank loans.