Incident: The company announced its 2018 semi-annual results announcement. During the reporting period, the company achieved operating income of 1.98 billion yuan, an increase of 27.14% over the previous year; achieved net profit attributable to shareholders of listed companies of 65.74 million yuan, an increase of 70.98%; deducted non-net profit attributable to shareholders of listed companies of 47.57 million yuan, an increase of 375%; and achieved basic earnings per share of 0.13 yuan, an increase of 85.71%. Opinion: Welded pipe production and sales have increased dramatically, and various revenues have increased. During the reporting period, the company achieved operating income of 198.3717 million yuan, an increase of 27.14% over the previous year. Sales of various types of pipelines were 389,900 tons, up 7.23% year on year. Among them, the revenue of galvanized steel pipes increased 27.38% over the same period of the previous year, the operating income of steel-plastic composite pipes increased 8.78% over the same period of the previous year, the revenue of spiral submerged arc welded pipes increased 20.27% over the same period of the previous year, the revenue of straight seam submerged arc welded pipes increased 109.12% over the same period last year; high-frequency straight seam welded pipe (HFW219) revenue increased 77.96% over the same period of the previous year. The price of raw materials is stable, and the gross margin of core products has increased. During the reporting period, raw material prices remained stable, with non-order-based civil pipelines achieving normal profits, of which the gross margin of galvanized steel pipes was 10.28%; sharp fluctuations in raw steel prices during the same period of the previous year and the lag in the impact of raw material prices on main business costs in the second quarter caused the gross margin of galvanized steel pipes to 4.66% in the same period last year; gross margin of straight seam submerged arc welded pipes increased 6.76 percentage points over the same period last year, reaching 15.2%; net profit attributable to shareholders of listed companies was 65.738 million yuan, an increase of 70.98% over the same period last year, with a net non-deducted non-deducted net profit of 70.98% The profit is the same That's a 375% increase. Financial expenses have been significantly reduced, and sales expenses and administrative expenses have increased. During the reporting period, sales expenses were 420.57 million yuan, an increase of 50.36% over the same period last year, mainly due to the extension of product sales regions and an increase in sales and transportation expenses. Management expenses were RMB 106.3773 million, an increase of 60.27% over the same period last year, mainly due to the increase in research and development expenses in the current period. The company adjusted its development strategy and optimized its asset structure. The total amount of bank financing funds decreased during the reporting period, resulting in a reduction of interest expenses. Financial expenses were 14.534,600 yuan, down 19.98% from the same period last year. Profit forecast and investment rating: We expect the company to achieve operating income of 4.22 billion yuan, 4.48 billion yuan and 4.58 billion yuan respectively from 2018 to 2020; net profit to mother of 187 million yuan, 203 million yuan and 213 million yuan respectively; EPS of 0.36 yuan, 0.39 yuan and 0.41 yuan respectively; corresponding PE is 19.3X, 17.8X and 17.0X respectively, giving it a “Highly Recommended” rating for the first time. Risk warning: Downstream demand falls short of expectations; supply-side reforms fall short of expectations.