The 2018 H1 performance was impressive, close to the forecast limit. During the reporting period, the company achieved operating income of 15.768 billion yuan, an increase of 36.8% over the previous year, and realized net profit of 1,017 billion yuan, an increase of 3562% over the previous year, close to the range limit previously predicted. On a quarterly basis, in 2018, Q1 and Q2 achieved net profit of 129 million yuan and 888 million yuan respectively, and steel production was 1.63 million tons and 2.33 million tons respectively. It can be seen that with the elimination of the impact of production restrictions during the heating season, the company's steel production increased significantly. The plan is to increase crude steel production by 21.4% throughout the year, focusing on production limits during the heating season. In 2017, Anyang produced 17.55 million tons of crude steel, and the company produced 7.43 million tons of crude steel, accounting for 42% of the city. In 2018, the company plans to increase crude steel by 21.39% to 9.03 million tons, and about 45% has been completed in the first half of the year. According to the newly released first draft of the Beijing-Tianjin-Hebei 2018 heating season, Anyang's steel production capacity is limited to 50% during the heating season. If the company wants to complete its planned annual production, then the heating season production limit policy for the second half of the year requires great attention. A fixed increase in capital raising reduces liabilities, and the capital structure is expected to improve. On May 14, 2018, the company issued a fixed increase plan. It plans to issue non-public shares to the controlling shareholder Angang Steel Group. It will raise no more than 2.5 billion yuan in capital, all of which will be used to repay bank loans and other interest-bearing liabilities. It has now been approved by the Henan Provincial State Assets Administration Commission and approved by the shareholders' meeting. If this fixed increase is successfully implemented, financial expenses are expected to be reduced by 110 million yuan per year, and the balance ratio is expected to drop by 7.6 percentage points to 71.1%. Cash flow performance continues to be excellent, and endogenous growth is worth paying attention to. Anyang Steel is one of the few steel mills with positive free cash flow for 5 consecutive years. The planned increase in the company's crude steel production in 2018 is among the highest among listed steel mills in China. Currently, the steel industry has experienced a certain reduction in supply due to production restrictions in Tangshan. Tangshan's air quality ranking has always been at the bottom, the production restriction policy is expected to continue, and now the cost performance ratio of adding scrap is lower than during the heating season, so the suppression of steel supply in the second half of the year is worth looking forward to. In the context of limited supply in the steel industry, companies with excellent cash flow and endogenous growth, such as Anyang Steel, deserve more attention. Investment advice: Maintain an “overweight” rating. Based on the company's impressive performance in the first half of 2018 and the recent strong performance of steel prices, we maintain the company's profit forecast for 2018-2020. Net profit is 20.69, 20.20, and 1,986 billion yuan, respectively, corresponding to EPS of 0.86, 0.84, and 0.83 yuan/share. The current stock price corresponds to PE in 2018 only 5.3 times, maintaining the “increase in holdings” rating. Risk warning: 1) There is a risk that environmental production restrictions will increase and the company's output will decline; 2) the company may relocate; 3) demand for steel falls short of expectations, and there is a risk that steel prices will decline.