2018 Interim Report: The company achieved profit of 700 million yuan in the first half of 2018, up 85% year on year. The company achieved operating income of 10.085 billion yuan in the first half of the year, up 20.59% year on year; realized net profit attributable to the parent company of 749 million yuan, an increase of 84.85% year on year. High bar profits helped increase the company's performance in the first half of the year. Strict implementation of environmental protection production limits led to tight steel supply and demand in the first half of the year. Steel prices were high, and steel profits continued to maintain a high level. As the largest bar and wire enterprise in the three eastern provinces, the company accounts for about 65% of the products, fully benefiting from the high profits of bars and achieving a significant increase in performance. According to the interim report, the company's gross profit per ton of steel reached 544.70 yuan in the first half of the year, an increase of 51.78% over the previous year. The expansion of the production limit during the heating season will increase the company's steel spillover. The company's performance growth potential is expected to spread to the Yangtze River Delta region and the Fenwei Plain. After the expansion of the production limit, the country's crude steel production capacity will increase from 23% in 2017 to 47% in 2018. If the heating season production limit ratio is 50%, it will further reduce the average daily iron water by 418,000 tons. The expansion of production limits during the heating season is expected to increase the tension between steel supply and demand, and the level of steel profit is expected to increase further. The company is located in Lingyuan City, Liaoning Province. It is not within the production limit area. It is expected to benefit from the increase in steel profits brought about by production restrictions during the heating season and obtain excess profits. The 2017 heating season production limit prompted the company to increase its steel investment in non-northeastern regions. The expansion of production limits during the heating season this year is expected to increase the company's steel overflow. According to estimates, the amount of steel sold by the company to non-Northeast regions in 2017 increased 12% year-on-year. The expansion of production limits during the heating season is expected to increase the difference in steel prices between the non-Northeast region and the Northeast region. The company's steel may flow more to non-Northeast regions, and the company's performance growth space is worth looking forward to. Good product structure and location advantages clearly stabilize the company's profits, maintain the “increase in holdings” rating to support construction steel demand in third- and fourth-tier cities, and increase environmental production restrictions to benefit steel companies outside the production limit area. As the leading steel company in Northeast Bar, the company has an advantage in product variety and location, and the steady growth of performance is strongly supported. The company's 2018-2020 EPS is expected to be 0.57, 0.63, and 0.66, respectively, and the corresponding PE is 6.75, 6.13, and 5.86 times. Considering that the current company's PE (TTM) is 8.28 times and the industry PE (TTM) is 10.29 times, it maintains an “gain” rating. Risk warning: Downstream demand changes, production limits fall short of expectations.