The judicial restructuring has been successfully completed, and steel production will gradually pick up. The company suffered huge losses and was insolvent in previous years. In 2017, the Siyuan Joint Fund initiated by Baowu Group acquired the company and carried out judicial restructuring, which was successfully completed at the end of the year. After the restructuring, the company introduced the management of Baowu Group and became a mixed-ownership steel enterprise. The company's crude steel production remains at 8.4 million tons, and will gradually resume production lines that had to be shut down. The company's steel production in 2017 recovered to 3.9 million tons, an increase of 68% over the previous year; in 2018, the planned steel production will reach 5.72 million tons, and the company's steel production has gradually rebounded. Earnings gradually recovered in 2017, and the balance ratio fell to 33%. After the restructuring was completed, the company's performance and profit in 2017 have begun to recover. In 2017, the company achieved net profit of 320 million yuan, reversing the previous huge loss situation. The company's net non-profit deducted in 2017 was still -1.87 billion yuan, mainly due to the high cost of repairing production line equipment. The company has repaid its original debt or converted debt to stock. After the restructuring, the balance ratio has dropped to 32.82%, and the asset situation has returned to a healthy level. Non-net profit after deducting 2018Q1 reached a record high, and operations are gradually on the right track. The company's gross margin for 2018Q1 has reached 10.33%, and achieved a net profit of 354 million yuan after deducting non-return to the parent, the highest level since listing. The company produced 1.94 million tons of crude steel in 2018 Q1, an increase of 210,000 tons over the plan. Net profit per ton of steel reached 237 yuan/ton, and management and financial expenses also dropped sharply. This shows that after the company successfully completed the restructuring, the main steel industry has gradually entered the right track since 2018. It is expected that the capacity utilization rate will increase year by year, boosting steady profit growth. We expect that the company's steel production will gradually increase, boosting steady profit growth, and further improving the asset structure. We expect the company to achieve net profit of 1,213 billion yuan, 1,435 billion yuan, and 1,632 billion yuan respectively in 2018-2020; the company's net assets at the end of 2018-2020 are estimated to be 17.943 billion yuan, 19.378 billion yuan, and 21,011 billion yuan respectively. For the first time, coverage was given an “increase in holdings” rating. The company's PB (2018E) is 1.1 times, while the current net market ratio of Shenwan Steel is 1.44 times. The company's net market ratio is lower than the industry average. Referring to comparable company valuations, Chongqing Iron and Steel was given a PB valuation of 1.2 times in 2018, with a target price of 2.41 yuan for 6 months. The company gradually got on the right track after successfully completing the judicial restructuring. Currently, its asset structure is healthy and its performance is growing. We covered it for the first time and gave it an “increase in holdings” rating. Risk warning: (1) corporate governance risk; (2) steel price fluctuation risk.