Matters: On July 3, 2018, Anyang Iron & Steel released a performance forecast. According to preliminary estimates by the company's finance department, it is estimated that the net profit attributable to shareholders of listed companies in the first half of 2018 will be between 90 million yuan and 1.05 million yuan. Compared with the same period last year, it is expected to increase by 872.24 million yuan to 102.24 million yuan, a year-on-year increase of 3142% to 3682%. Comment: The end of production restrictions increased production and boosted corporate profit growth. Affected by production restrictions during the heating season, the company's production declined sharply in the first quarter, totaling 1,633,400 tons in three months; entering the second quarter, the company's production gradually recovered, with an output of 640,600 tons in a single quarter in April and 865,200 tons in a single quarter in May, the highest level in the same period in history, mainly due to a 100t electric furnace that the company restarted earlier. It is expected that June production will remain at a high level. It is expected that production in a single quarter will remain at a high level. The output in a single quarter is expected to be 2.4 million tons, an increase of 770,000 tons over the first quarter. Increased production is one of the important reasons for the increase in performance. Mainly hot rolling+medium and thick plates, with excellent product structure. The company has a wide variety of products, and its main products are medium and heavy plate and hot rolling, which account for about half of the output. The simulated average profit levels for medium and heavy plate and hot rolling in the second quarter were 1,050 yuan/ton and 950 yuan/ton, respectively. The excellent variety structure was another reason why the company had high profits in the second quarter. The majority shareholders' fixed increase has already passed the shareholders' meeting, and it is expected that financial expenses will be reduced after completion. The balance ratio of 2018Q1 company is as high as 79%, and its financial expenses are at a high level in the industry. Financial expenses for the full year of last year reached 1 billion dollars, seriously eroding profits. Currently, the company's fixed increase plan has been approved by the shareholders' meeting. The funds raised by the fixed increase will be earmarked for debt repayment and leverage reduction. If the highest fundraising standard of 2.5 billion yuan is achieved, the annual financial expenses will be reduced by 125 million yuan based on a 5% loan interest rate. Environmental protection equipment is advanced, and it is expected that the impact of production restrictions during the heating season will be reduced. At the beginning of 2017, the company carried out flue gas desulfurization and denitrification projects at the advanced level in China for all three sintering machines. They were officially put into operation on May 3 this year, and can now steadily meet the special emission limit standards for “26+2” cities on October 1 this year. According to Henan Province's Blue Sky Defense Battle Plan, steel companies that meet the standards will have unlimited or limited winter production limits, and it is expected that the impact of the company's heating season production restrictions will be drastically reduced. Investment suggestions: We expect the company's operating income for 2018-2020 to be 346.51/357.56/36.861 billion yuan, corresponding net profit of 24.65/25.23/2,861 billion yuan, corresponding EPS of 1.03/1.05/1.20 yuan, and corresponding PE of 4/4/3 times, respectively. First coverage, giving a “recommended” rating. Risk warning: production restrictions during the heating season are increasing, demand is weakening