Incidents: Recently, Xinjiang Zhonghe released its 2019 mid-year report. In the first half of 2019, the company achieved operating income of 2,253 billion yuan, a year-on-year decrease of 1.89%; net profit attributable to shareholders of the parent company was 907.664 million yuan, a year-on-year decrease of 11.16%. Basic earnings per share were $0.1,089, down 11.17% year on year. Comment: Revenue has declined, and the fire incident has significantly affected sector revenue. In the first half of 2019, the company achieved revenue of 2.253 billion yuan, a year-on-year decrease of 1.89%. The main reason for the decline is that the revenue of electrode foil products fell by 21.47%; the revenue of alloy products fell by 28.58%. Among other products, aluminum products performed well, and revenue increased sharply by 55.32% year on year; the revenue of high-purity aluminum and electronic aluminum foil products was basically the same as the same period last year. The main reason for the decline in revenue of electrode foil products is the decline in production and sales due to the impact of a fire accident in a corroded foil workshop. In the first half of the year, the company achieved net profit attributable to shareholders of the parent company of 906.764 million yuan, a year-on-year decrease of 11.16%. The main reason is that the product's gross margin has declined due to rising costs. Among them, the gross margin of electrode foil products decreased by 1.36 percentage points, and the gross margin of alloy products decreased by 3.48 percentage points. The reason for the increase in costs is the increase in the cost of alumina, a major raw material compared to the same year of the previous period, and the increase in costs caused by the company's external procurement of corrosive foil products. The electronic aluminum foil business continues to improve, and corrosive foil and chemical foil projects are progressing smoothly. The company is one of the earliest enterprises engaged in the development of new aluminum electronic materials in China. It has the world's largest high-purity aluminum production base, and has now formed a “energy-high-purity aluminum-electronic aluminum foil-electrode foil” circular economy industrial chain for new electronic materials. During the reporting period, the prices of the company's main products, electronic aluminum foil and electrode foil products, rose markedly. Against this background, the gross margin of electronic aluminum foil products reached 30.43%, an increase of 2.1 percentage points over the same period in 2018 and 4.03 percentage points over the same period in 2017. In the first half of 2019, the company vigorously promoted the construction of major projects such as the high-pressure high-performance corrosive foil project with an annual output of 15 million square meters and the high-pressure high-performance chemical foil project with an annual output of 15 million square meters. As of June 30, some production lines had entered the commissioning stage. After full production, the company's production capacity will increase, and revenue will increase significantly. Targeted additional issuance has been completed, and asset quality has improved significantly. During the reporting period, the company completed targeted issuance increases, its balance ratio declined markedly, its ability to repay debts improved markedly, and its asset structure became healthier. According to the company's “Report on the Status of Non-public Issuance of Shares”, after the IPO registration was completed, Gree Electric became the third largest shareholder of the company, holding 4.44% of the company's shares. Gree's strategic shareholding helps the company strengthen cooperation with downstream enterprises and helps the company achieve more stable sales of its products. Profit forecast and rating: We expect the company's diluted earnings per share in 2019-2021 to be $0.13, $0.16, and $0.20, respectively. According to the latest closing price calculation, the corresponding PE is 36, 29, and 24 times, respectively, maintaining the “buy” rating. Risk factors: Electronic aluminum foil prices fluctuated sharply; high-purity aluminum sales fell short of expectations; logistics industry transformation fell short of expectations.