Event description: On the evening of July 3, Anyang Iron & Steel released a performance forecast. It is estimated that the 2018 H1 net profit will be between 900 million yuan and 1.05 billion yuan. Incident review: 1.2nd quarter results increased 500%-620% month-on-month, Q2 annualized PE 2.4-2.9 times, and H1 annualized PE 4.2-4.9 times. 2018Q2 is expected to be 771-921 million yuan, with a month-on-month increase of 500%-620% over Q1 and an increase of 3142% to 3682% over 17Q2. In April and May, the company's monthly production reached 641,000 tons and 865,000 tons, respectively; in Q1, production was reduced and profits declined due to environmental production restrictions, Q2 production restrictions were lifted, and production and performance returned to normal levels in the industry, achieving significant increases over Q1. Annualized according to Q2 performance, the company's annualized PE is only 2.4-2.9 times. 2. Environmental transformation is complete, and production is expected to continue during the 18-19 heating season. At the beginning of 2017, the company carried out dry flue gas desulfurization and denitrification projects for all three sintering machines, which have now steadily reached the ultra-low emission standards of channel cities. According to the “2018 Air Pollution Prevention and Control Campaign Implementation Plan of Henan Province” in '18, steel companies that meet ultra-low emission standards can limit production during the heating season, and the company is expected to continue production during the heating season. The company's profit declined in '17 due to environmental production restrictions, which is below the industry average; if the company continues to produce during the 18-19 heating season, it is expected that the high profit in Q2 will continue. 3. Demand is resilient and environmentally friendly production limits are expected to maintain a tight balance between supply and demand in the industry for a long time. The cumulative growth rate of new real estate construction in January-May was 10.8%, effectively hedging the decline in infrastructure growth. Industry demand remained resilient throughout the year. The State Council's “Three-Year Action Plan to Win the Battle to Defend the Blue Sky” document states that it is strictly prohibited to add additional steel production capacity in key environmental protection regions. It is expected that in the future, when environmental production restrictions become stricter, it will be difficult to release supply effectively; industry supply and demand are expected to maintain a tight balance over the long term, providing strong support for steel prices. 4. The company's fixed increase will pass the shareholders' meeting, and financial expenses are expected to be drastically reduced. The balance ratio of 2018Q1 company is as high as 79%, and the annual financial expenses in 2017 have reached 1 billion yuan, which has greatly affected the company's net profit. Currently, the company's fixed increase plan has been passed by the shareholders' meeting. The funds raised by the fixed increase will be earmarked to repay liabilities and reduce the balance ratio. Financial expenses are expected to be drastically reduced, which in turn will increase the company's net profit. Investment advice and valuation: The company's net profit for 18-20 is estimated to be 27.0 billion, 31.7 and 3.30 billion yuan respectively, corresponding to PE 3.3, 2.8 and 2.7 times. For the first time, coverage gave a “Highly Recommended” rating. Risk warning: sharp decline in demand, risk of capital market fluctuations