This report is read as follows:

Downstream demand growth led to the growth of the company's product output, while rising costs pushed up the company's product prices, and the company's performance was in line with expectations. With the increase of the company's production capacity, the performance will be released gradually.

Main points of investment:

Maintain the "overweight" rating with a target price of 21.96 yuan. The company's product output has increased steadily and its performance has been gradually released. Maintain the company's EPS forecast of 0.94,1.31,1.66 yuan from 2018 to 2020, maintain the company's target price of 21.96 yuan, and maintain the "overweight" rating.

Downstream demand is growing steadily, and the company's performance is in line with expectations. In the first half of 2018, the company produced 170200 tons of steel wire products, an increase of 15% over the same period last year; revenue of 1.16 billion yuan, an increase of 37.85% over the same period last year; net profit of 101 million yuan, an increase of 47.52% over the same period last year; the product price of 6815.51 yuan per ton, an increase of 15.34% over 2017; and a gross profit of 1109.87 yuan per ton, an increase of 10.66% over 2017. The steady growth of downstream tire production has led to a rise in demand for the company's products; at the same time, the rising cost of the company's products has pushed up the price of the company's products, and the company's business as a whole has developed steadily.

Focus on the tire skeleton industry, the output is expected to increase steadily. The company is based on the tire skeleton industry and is committed to expanding market share. The company's initial public offering raised funds to expand the company's production capacity, and the construction of new capacity is progressing smoothly. The consumption attribute of the downstream tire industry is strong, and the output increases steadily, the company orders are sufficient, and the capacity utilization rate remains high. The company's new production capacity will be fully released, driving the company's performance growth.

The industry pattern is good, and the company's competitive advantage continues to improve. The company is the leader of China's bead steel wire industry and participates in the formulation of industry standards. The domestic market share of bead steel products is maintained at about 30%. It is the largest bead steel wire manufacturer in China and has a solid position in the industry. After extensive development, the pattern of the bead wire industry is stable and the barriers to entry are raised. As the leader of the industry, with the gradual improvement of its own production capacity and the stability of the industry pattern, the company has obvious competitive advantages and entered a period of rapid development.

Risk hint: tire production is down sharply.