Key Investment Companies disclosed 2018 results: revenue of 5.912 billion yuan, up 24.2% year on year; gross profit of 1,986 billion yuan, up 67.5% year on year; gross margin increased 8.7 pct to 33.6%; net profit of 1.159 billion yuan, up 63.1% year on year; dividend ratio 12%. Revenue for the second half of the year was $3.31 billion, up 25.0% year on year; gross profit was $1,020 million, up 41.8% year on year; gross profit margin was 30.8%, down 6.3 pct month on month; net profit was 513 million yuan, up 4.1% year on year, down 20.7% month on month. Demand for cement in the Shaanxi market is under some pressure. The company's sales volume of cement and clinker in 2018 was 18.2 million tons, a year-on-year decrease of 4.7%, and the price of a ton of cement was 314 yuan, up 66 yuan/ +26.6% year on year. National environmental inspection is becoming more stringent on the Fenwei Plain. Coupled with comprehensive management actions in the Qinling Mountains to curb illegal mining, environmental cost pressures related to environmental protection have also been highlighted. According to estimates, the company's tonne cement & clinker cost increased by 29 yuan/ 13.4% year on year to 216 yuan. Among them, the cost of coal increased by about 3.8 yuan, the cost of raw materials such as gravel increased by 3 yuan, the cost of workers increased by 2.7 yuan, and the cost of environmental protection increased by 8.4 yuan. Environment-related expenses such as sewage treatment fees, environmental costs, safety costs, and maintenance funds in the second half of the year put more pressure on H2 costs, causing the company's H2 gross margin to drop 6.3 pct month-on-month. Diversified businesses contribute new growth points. Yaobai Environmental Protection achieved a profit of 118 million yuan, contributing 23.68 million in revenue to listed companies. Guangxin International recorded interest income of 128 million yuan. Our view: The profit level of the cement industry in Shaanxi is close to the highest region in history, and the enterprise efficiency is good. Large enterprises such as Western Cement, Jidong Cement, and Sinoma have built 10,000 ton lines one after another, further enhancing the competitiveness of enterprises and forcing the withdrawal of ineffective and expensive production capacity. Cost increases have abated in 2019. We expect the company to achieve net profit of 1,465 billion yuan and 1,532 billion yuan in 2019-2020. The 2019/3/20 closing price corresponding to 2019E is 3.4X, PB is 0.56X, and the market value of tons of clinker is 299 yuan, which is lower than the replacement cost. Western cement is an important “west gate”, and the integration potential is underestimated. Maintaining a “prudent increase in holdings” rating, the target price is HK$1.63. It is recommended that medium- to long-term investors who value absolute returns pay attention. Risk warning: economic deterioration, collapse of industry collaboration, raw material price fluctuations, credit risk, equity disputes