1. The environmental transformation has been completed, and the level of pollutant control is relatively leading in the country. It is expected that production will no longer be limited during the heating season. The company's environmental production restrictions were severe during the heating season last year. The profit level was much lower than that of its peers, and at the same time, it also seriously affected stock valuations. The company has vigorously promoted environmental transformation this year. The coking and sintering process has installed the most advanced active coke environmental protection equipment at present, has reached special emission limit standards, and the control levels of particulate matter, sulfur dioxide, and nitrogen oxides are already in a relatively leading position in the country. According to the policy, it is likely that the company will no longer limit production during the future heating season, production capacity utilization will return to normal levels, and profit levels will also improve significantly year over year. At the same time, the company's production is expected to continue to increase in '18 and '19. In the future, with the gradual completion of the Zhoukou Steel Plant and contributing to an effective increase in production capacity, the company will become one of the few targets in the industry with room for continuous increase in production. 2. The combination of debt-for-equity swaps will increase and reduce liabilities, and the high balance ratio and financial expenses will improve markedly. Angang Steel and CCB negotiated to establish a debt-for-equity project with a total scale of 10 billion yuan. The first batch of capital of 1.6 billion yuan for the first phase of the debt-for-equity swap project was successfully completed in March '18. The company issued a fixed increase plan in May '18. It plans to set a fixed increase of not more than 2.5 billion yuan for the controlling shareholders to repay bank loans and other liabilities. It has now been approved by the Henan State Assets Administration Commission. We estimate that the company's balance ratio is expected to drop sharply to about 71%, reducing financial expenses by 110 million yuan/year. The reduction in financial expenses is expected to help further improve the company's performance. 3. The market value of tons of steel is low, and the stock price is very flexible. The annualized valuation of the second quarter results is the lowest in the industry. The market value of the company's tonnes of steel is 1,110 yuan/ton. It is in the 3rd lowest position in the industry, and its stock price is very flexible. We judge that the company's heating season is likely to have no production, so Q1's low profit under environmental production restrictions is meaningless. It is more reasonable to calculate the valuation by annualizing the company's Q2 performance in a single quarter. The annualized valuation of the company's Q2 performance is only 2.8-3.4 times. The annualized valuation of Q2 performance is the lowest in the steel industry, and the valuation advantage is very obvious. 4. Due to the continuous increase in environmental production restrictions and strong demand resilience, the industry's high profitability is expected to continue. The steel supply side is affected by increased environmental production restrictions, and it is expected that supply release will continue to be blocked; the largest downstream real estate investment on the demand side is still very strong. We judge that the decline in infrastructure investment is close to the bottom, and steel demand is still very resilient. Inventories remained at historically low levels during the off-season, and are falling against the trend. Environmental protection continues to increase and demand resilience. We judge that steel profits are expected to remain high throughout the year. Profit forecast and valuation: Net profit for 18-20 is expected to be 27.0, 31.7 and 3.30 billion yuan respectively, corresponding to PE 3.9, 3.3 and 3.2 times. Maintain a “Highly Recommended” rating. Risk warning: the macroeconomic downturn is too fast, and a one-size-fits-all environmental policy will be implemented again