2018 three-quarter report: The company achieved profit of 1,277 billion yuan in the first three quarters, up 28.21% year on year. The company achieved operating income of 15.804 billion yuan in the first three quarters, up 17.89% year on year; net profit attributable to the parent company was 1,277 million yuan, up 28.21% year on year; of these, net profit attributable to the parent company was 528 million yuan in the third quarter, down 10.62% year on year and up 6.93% month on month. The company's profit remained at a high level in the third quarter. The increase in coke prices eroded the profit of finished materials to a certain extent. Steel prices remained high in the third quarter, and steel profits remained at a high level. According to the company's three-quarter report, the average price of steel sold by the company in the third quarter reached 3,677 yuan/ton, an increase of 16.53% over the previous year; according to estimates, the company's profit per ton of steel in the third quarter reached 494 yuan/ton, a decrease of 13.43% over the previous year. The main reason why the company's profit per ton of steel declined even though the average steel sales price was higher than the same period last year was that the rise in coke prices in the third quarter eroded the profit of finished materials. The company purchased all of its coke from Ling Steel Group. The purchase price used the market price. The average price of coke purchased by the company in the third quarter of this year was 2,078 yuan/ton, while the purchase price of coke in the same period last year was only 1,705 yuan/ton. According to estimates of 0.4 tons of coke used to produce 1 ton of molten iron in the third quarter, the cost of coke corresponding to the production of one ton of molten iron increased by 149 yuan, and the profit of finished materials was greatly affected. Production limits during the heating season may exceed expectations. The company is located in an unrestricted production area and is expected to benefit. Recently, the Yangtze River Delta region issued a draft for comments on the fall and winter air pollution campaign, requiring that the average concentration of PM2.5 in the region, and the number of days with severe or above pollution during the fall and winter period be reduced by about 5% over the same period last year. The scope of production limits for the heating season has been expanded this year, and production limits will spread to the Yangtze River Delta region and the Fenwei Plain. Considering the current relatively high environmental pressure on local governments, it is expected that the implementation of production limits during the heating season may exceed expectations, and the impact of production restrictions on steel supply will still exist. 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 location advantage stabilizes the company's profits, and maintains the “increase in holdings” rating company as the leading steel company in Northeast Bar. The location advantage is obvious, 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 yuan/share, respectively, and the corresponding PE is 6.14, 5.58, and 5.33 times. Considering that the current company's PE (TTM) is 6.29 times and the industry PE (TTM) is 7.25 times, it maintains an “gain” rating. Risk warning: Downstream demand changes, production limits fall short of expectations.