Achieving net profit of 760 million yuan in the first half of the year benefited from the healthy operation of the industry. In the first half of 2018, the company achieved operating income of 11.093 billion yuan, an increase of 145.32% over the previous year, and a total profit of 763 million yuan. Compared with the huge loss of 999 million yuan in the same period last year, the company turned a sharp loss into a profit. The second quarter achieved net profit of 412 million yuan in a single quarter, an increase of 17.5% over the first quarter, and a significant year-on-year increase in production in the first half of the year. The company achieved iron, steel and material production in the first half of the year to 2.7845 million tons, 3.101 million tons, and 2,96669 million tons, respectively, an increase of 79.10%, 89.96% and 91.57% over the same period last year; steel sales volume of 2,945,000 tons in the second quarter was 1,548,000 tons, up 9.1% year on year; second quarter steel production was 1,548,000 tons, up 9.1% month on month. Product prices all increased to varying degrees compared to the average sales price of various types of steel in the first half of the year and the first quarter. Among them, the average price of steel in the first quarter was 3539.6 yuan/ton, while the average price of steel increased slightly in the first half of the year, reaching 35,73.1 yuan/ton. The increase in production volume and the increase in sales prices have increased the company's profits. Quarterly management expenses and financial expenses for the second quarter increased sharply month-on-month. The company's sales expenses, management expenses, and financial expenses in the first half of the year were 41.886 million yuan, 731 million yuan, and 147 million yuan respectively, up 77.3%, and down 71.4% year on year, respectively. The year-on-year increase in sales expenses was mainly due to a 125.45% year-on-year increase in steel sales in the first half of the year. Quarterly management expenses and financial expenses for the second quarter were 638 million yuan and 115 million yuan respectively, up 580% and 261%, respectively. Among them, the increase in management expenses was mainly to ensure the normal functioning of the equipment. In the first half of the year, 446 million yuan was invested in maintenance expenses. The debt ratio continued to drop sharply. The company's debt ratio at the end of the first half of the year was 28.29%, which continued to drop 4.35 percentage points from the end of March, and financial pressure dropped sharply. Investment advice Our earnings expectations for the company remain unchanged and we continue to maintain our initial coverage forecast. It is predicted that the company will achieve operating income of 21.18 billion yuan, 21.6 billion yuan and 22.04 billion yuan in 2018-2020, and achieve net profit of 1,496/14.14/1,502 billion yuan, and continue to be given a “neutral” rating. The risk suggests a sharp decline in steel consumption.