Core point of view: 1. 2018 performance: production volume and gross profit per ton of steel increased, and the decline in expenses during the period helped significantly increase profits. In 2018, Chongqing Steel produced 6.38 million tons of steel, an increase of 55.10% over the previous year, and 6.11 million tons of steel, an increase of 56.50% over the previous year. The company achieved operating income of 22,639 billion yuan, an increase of 71.03% over the previous year; net profit of the mother was 1,788 billion yuan, an increase of 458.72% over the previous year. In 2018, the company's gross profit per ton of steel was 484 yuan/ton, an increase of 344% over the previous year, an increase of 15% higher than the industry average; the total cost of tons of steel for the period was 175 yuan/ton, a year-on-year decrease of 64%, of which the management cost of tons of steel fell 61% year on year to 130 yuan/ton. The sharp increase in gross profit of tons of steel and the sharp reduction in management expenses helped the company's profits to increase dramatically. 2. 2019 Plan and Company Highlights: Crude steel production is expected to rise slightly, full production and sales, and cost leadership strategies to consolidate the company's profitability. According to the company's 2018 annual report, the company plans to produce 6.4 million tons of steel in 2019, a slight increase of 0.31% over actual production in 2018. Judging from historical data, the completion rate of the company's production plans in the past three years has exceeded 98%; using “deep cultivation in Chongqing, based in Sichuan and Chongqing, and radiating southwest China” as the market strategy, it adheres to the regional market, while establishing direct supply, direct sales, and direct distribution systems to optimize the channel structure; implementing a strategy of full production and sales and leading cost to improve production efficiency and achieve comprehensive cost reduction. The company's profitability is expected to be further strengthened. 3. Investment suggestions: Profitability is expected to be further strengthened by the strategy of full production and sales and cost leadership to consolidate profitability, maintain the “increase in holdings” rating of Chongqing Iron and Steel, which has both boards and boards, stick to the regional market, stick to the regional market, and implement a strategy of full production and full sales and cost leadership. The company's EPS for 2019-2021 is expected to be RMB 0.14/0.15/0.16, corresponding to the closing price on March 29. The 2019-2021 PE is 15.66/14.94/13.69 times, and PB is 0.99/0.93/0.87 times. As of March 29, 2019, the PB_LF of Shenwan Steel's sector was 1.2 times higher. We believe that with the consolidation of the company's profitability, the company's PB valuation should be restored to close to the average value of the Shenwan Steel sector, that is, about 1.2 times. It is estimated that the company's net assets per share in 2019 will be 2.22 yuan, and the corresponding reasonable value of the company should be around 2.67 yuan/share. Based on the premium ratio of A and H shares and the exchange rate calculation, the reasonable value of H shares is HK$1.64 per share. Maintain the “increase in holdings” ratings of the company's A and H shares. 4. Risk warning: macroeconomic decline exceeding expectations; raw material prices rising above expectations erode profit margins; environmental policy uncertainty; supply-side structural reform process falling short of expectations.