2019Q2 made a profit of 318 million yuan, a year-on-year increase of 345%. On August 22, 2019, the company released its 2019 annual report: 2019H1 operating income of 9.542 billion yuan (YoY +16.2%); net profit attributable to shareholders of the parent company of 124 million yuan (YoY -42.6%). 2019Q2 revenue of 5.619 billion yuan (YoY +16.9%, QoQ +43.2%); net profit attributable to shareholders of the parent company was 318 million yuan (YoY+ 345%, QoQ +264%). Xinjiang's fixed asset investment target growth rate in 2019 was 5%. The cumulative growth rate for the previous 3 months and 6 months was -9.1% and 7.3%, respectively, and the fixed investment target may be achieved this year; when combined with the company's resumption of production of European smelters, we raised our early profit forecast. The company's EPS for 2019-2021 is 0.31, 0.38, and 0.43 yuan, respectively, and the corresponding PE is 10.22, 8.37, and 7.24 times, respectively, and raised to the “increase in holdings” rating. Domestic investment demand improved, and European smelter production resumed. The company's supply and demand company had an annual production capacity of 6.6 million tons of iron, 8 million tons of steel, and 8.7 million tons of material. In 2019H1, the company's domestic market share for building materials and plates was 33.4% and 80% (YoY+0.4 and +5pct), respectively. 19Q1 is the low season in Xinjiang. The company's production and sales volume were 102.8 and 10.74 million tons respectively; 19Q2 entered the peak demand season in Xinjiang, and the superimposed company resumed production of European smelters in March (production capacity 1.35 million tons, using fused reduced iron technology, no coke required). The company's production and sales volumes were 160.5 and 14.73 million tons (YoY+22.5, +14.6%, QoQ+56.1, 37.1%). Increased production and sales improved the company's operating income, and diluted fixed costs, and improved product gross profit margin. Q2 gross profit margin (13.0 percent) YoY +2.5pct, QoQ+9.5pct). Operating cash flow turned negative, and the upstream and downstream payment capacity decreased. The cash from 2019H1's sales accounted for 103.0% of operating income (YOY+12.3pct). Repayment capacity increased slightly, but due to a drop in steel sales unit prices, raw material costs surged, and operating cash flow became negative. 2019H1, the company's accounts receivable and pre-received items accounted for 4.08% and 13.39% of revenue (YoY-2.7, -4.4pct), and payable items and prepaid items accounted for 83.18% and 10.56% of operating costs (YoY-24.3, +9.4 pct), and the company's upstream and downstream payment capacity weakened. In terms of expenses, 2019H1 sales expenses, management expenses, R&D expenses, and financial expenses changed by +27.4%, +40.6%, -34.3%, and -23.0%, respectively. The decrease in financial expenses was mainly due to a reduction in discount expenses, and the decline in R&D expenses was mainly due to a decrease in investment in new products. Domestic demand improved in 19H1; 19H2 may continue. In 2018, Xinjiang's fixed asset investment growth target is 15%, the actual annual growth rate is -25.2%, and completion is poor; in 2019, the fixed asset investment growth rate in Xinjiang is 5%, and the half-year growth rate is actually 7.3% (YoY+56.2pct), which is relatively good. Considering the high base for the second half of last year, if Xinjiang achieves its annual target this year, then demand in the second half of the year will be better than in the first half of the year, and the company will directly benefit. Downstream demand is expected to continue to be maintained in the third quarter. We expect the company's EPS in 2019-2021 to be 0.31, 0.38, 0.43 yuan, corresponding PE 10.22, 8.37, and 7.24 times; the previous forecast is 0.29, 0.31, and 0.33 yuan for 2019-2021. Comparable companies' average PB (2019E) was 1.03. Considering the significant month-on-month improvement in domestic demand, downstream demand is expected to be maintained in the third quarter, and the company can adjust the domestic and overseas sales structure in due course, the company was given a PB valuation of 1.2-1.25 times. The corresponding target price was 3.53-3.68 yuan, which was raised to an “increase in holdings” rating. Risk warning: macroeconomic situation and policy adjustments at home and abroad; domestic demand falls short of expectations, etc.