Key investment points: In the first quarter of 2019, the company achieved operating income of 5.268 billion yuan, up 11.37% year on year, down 9.44% month on month; realized net profit of 212 million yuan, up 2.06% year on year and down 50.07% month on month, in line with our expectations and a basic EPS of about 0.21 yuan. Ferrosilicon: 2019Q1 The average price of ferrosilicon in Inner Mongolia fell 28.17% year on year and 12.57% month on month. In the first quarter, the country's ferrosilicon production fell 1.42% year on year and 10.66% month on month. The decline in national production is mainly due to the continuous decline in prices combined with the increase in production costs. Industry profits continue to shrink, leading to many active production shelters. Silicon manganese: In the first quarter of 2019, the average price of silicon and manganese in Inner Mongolia fell 8.26% year on year and 11.25% month on month. In the first quarter, the country's silicon-manganese production increased by 21.84% year on year and decreased by 6.63% month on month. Although production increased year on year, production declined significantly month-on-month compared to the fourth quarter of 2018, also due to a correction in profit. 1) The company's gross profit declined along with the industry. In the first quarter, the company achieved gross profit of 1,400 million dollars, a year-on-year decrease of 13.97%; the overall gross profit margin was 26.57%, down 7.83 percentage points from the previous year. Overall profitability declined with the industry. 2) The cost ratio for the four categories decreased slightly, investment income increased, and cashmere clothing led to a year-on-year increase in net profit. The company's four cost rates, with the exception of the R&D cost rate, which increased due to increased R&D investment by the subsidiary Electric Power Metallurgy Company, all others were reduced to varying degrees. The fourth rate was 19.15%, down 2.63 percentage points from the same period last year. In the first quarter, the company achieved a year-on-year increase in investment income of 53.72 million (+102%). In addition, the company's minority shareholders' profit and loss decreased by 95.15 million (-52%) year on year. We judge that the decrease in minority shareholders' profit was due to a decrease in profit in the electric metallurgical chemical sector of the subsidiary Dianmetallurgical Group, while the company's overall net profit increased year over year due to the increase in the cashmere garment business. Ferroalloy prices in the second quarter are unlikely to have an upward trend. The cashmere garment business is in the traditional low season, so it is difficult for the company's performance to improve significantly year over year, and it has declined seasonally from month to month. Although ferroalloy production in the first quarter declined month-on-month due to a correction in profit, it is still at an all-time high. The current positive production of downstream steel mills means that demand is fair, and overall supply and demand are strong. However, due to the large social stocks of alloys, it still takes time to digest them, making it difficult for prices to trend upward. As of the end of April, the average price of ferrosilicon and manganese silicon in Inner Mongolia fell 5.97% and 2.99% year on year from the average price in the second quarter of 2018, and increased by 2.52% and decreased by 2.37% from the average price in the first quarter of 2019. Also, the second quarter was a low season for the company's cashmere clothing business, and its contribution to performance was limited. It is expected that the company's performance in the second quarter will hardly improve significantly year-on-year, with a month-on-month seasonal decline. Acquire shares in electric power metallurgy companies to further strengthen the “coal-electricity-ferrosilicon alloy” industry chain. The company has a complete “coal-electricity-ferrosilicon alloy” industry chain, has coal mines and its own power plants in Kengkou, and is almost 100% self-sufficient in producing electricity. Electricity costs account for about 70%, 20%, and 50% of the production costs of ferrosilicon, silicon manganese, and PVC. Therefore, under the increase in alloy prices, the company's performance is flexible. On April 1, the company completed the acquisition of 14.06% of the shares in electric metallurgy held by Inner Mongolia Ordos Cashmere Group Co., Ltd., the controlling shareholder of the company, thus further strengthening its integrated metallurgical industry chain. Raise the profit forecast and maintain the “increase in holdings” rating. The company's “circular economy” model has strong advantages in terms of raw material reserves and electricity costs. As the company completed a 14.06% equity acquisition for electric metallurgy, we raised our profit forecast. The estimated net profit for 2019-2021 is 926/8.60/839 million yuan (previously 783/7.23/705 million yuan), corresponding to EPS 0.68/0.63/0.62 yuan, and the current stock price is 13/14/14 times PE. Maintain the “Overweight” rating!