Key points of the report Shaanxi: A stock gaming market with a high concentration of good markets worthy of attention. The cement market in Shaanxi shows a four-legged pattern. The top four West, Hailuo, Jidong and Shengwei account for 75% of production capacity and are highly concentrated. Furthermore, Hailuo Cement is the company's second-largest shareholder, and the strengthening of collaboration between the two will further consolidate the pattern of regional stability; starting in 2015, the new production capacity in the Shaanxi region has been drastically reduced. According to the current capacity replacement project, no additional production capacity is expected in 2019-2020. Furthermore, under environmental pressure, regional production restrictions will continue at erroneous peaks, and supply-side constraints will still exist. The construction of the Guanzhong urban agglomeration stabilizes medium-term demand. Reviewing historical data, there is a strong positive correlation between regional cement demand performance and population inflow, while Shaanxi is one of the few provinces in the northwest that has maintained a continuous influx of population, and the growth rate of its resident population has continued to increase in recent years; the construction of the Guanzhong urban agglomeration will support mid-term regional demand, driven by demand in core cities such as Xi'an and the construction of huge regional transportation networks. Judging from the commencement and planning of regional projects, regional demand is expected to continue to grow in the next 2-3 years. Western Cement: An underestimated regional leader with a reasonable production capacity layout and deep cultivation in Guanzhong and southern Shaanxi. According to Zhuochuang data, the company's clinker production capacity is 18.6 million tons, with Shaanxi accounting for 81%, Xinjiang accounting for 15%, and Guizhou accounting for 4%. Among them, the company's production capacity in Shaanxi is mainly located in Guanzhong and southern Shaanxi regions, where demand is good. The company has an absolute advantage in the southern Shaanxi region and will fully benefit from regional infrastructure; the company's production line in Guizhou is close to Gui'an New Area, so demand is also guaranteed. Leveraging the advantages of mining epitaxial aggregates business. In 2018, the company put into operation 4 aggregate production lines with a total production capacity of 7 million tons, and plans to achieve an annual production capacity of 20 million tons through new construction projects within 3-5 years. Considering that the company has sufficient reserves of mine resources, it will provide favorable conditions for the development of the aggregate business, and the aggregate business will collaborate with the company's cement business to bind downstream customers. Judging from leading domestic companies, Hailuo and Huaxin, the aggregate business has a high level of profit; against leading foreign companies, the company's aggregate business has a lot of room for development. Look forward to value discoveries after the stock price is undervalued. 1) In the post-expansion era, the company's dividend rate center is expected to increase. The company's dividend payment rate in 2018 fell to 12.2% from 20.4% in 2017, or is related to the maturity of the company's dollar bonds. In medium to long-term considerations, considering that the expansion period of the industry has passed, capital expenditure is expected to decline, and the dividend rate center is expected to increase; 2) Cement stocks have the lowest valuation. Currently, both company PE and PB are near the bottom of history. Compared with other cement companies in the same industry, the company's valuation has obvious advantages. Investment advice: Considering the improving regional supply and demand pattern, cement prices are expected to show a steady upward trend. Further considering the increase in sales volume of specialty cement and the performance contribution of the aggregate business, we expect the company's net profit to be about 2 billion yuan in 2019, corresponding to PE only 2.9 times, giving it a purchase rating. Risk warning: 1. The implementation of infrastructure projects in Shaanxi fell short of expectations; 2. The decline in new regional real estate projects exceeded expectations.