Key investment performance summary: The company released its 2019 semi-annual report. In the first half of the year, the company achieved operating income of 9.542 billion yuan, an increase of 16.2%; achieved net profit attributable to shareholders of listed companies of 124 million yuan, a year-on-year decrease of 42.7%; and net profit after deducting non-return to mother was 120 million yuan, a decrease of 43.1% year on year. EPS during the reporting period was 0.08 yuan, and EPS in a single quarter was -0.13 yuan and 0.21 yuan respectively; tonne steel data: The company's steel production in the first half of the year was 2.63 million tons, up 12.3% year on year. Among them, building materials production was 1.1 million tons, up 15.4% year on year, and plate production was 1.53 million tons, up 10.2% year on year. Since the semi-annual report did not separately disclose the revenue situation of the steel industry, we combined the semi-annual report data to calculate that the sales price of a ton of steel was 3,624 yuan, the cost of a ton of steel was 3,292 yuan, and gross profit of 332 yuan per ton, an increase of 120 yuan/ton, 177 yuan/ton, and (-57) yuan/ton, respectively; the growth rate of domestic infrastructure investment declined significantly. In the year, fixed asset investment in China fell sharply by 25.2%, and demand for steel was greatly suppressed. Since this year, with the frequent introduction of countercyclical regulation policies, the government has a strong desire for steady growth through infrastructure investment. The credit environment and financial aspects have improved. The cumulative year-on-year growth rate of domestic fixed asset investment was corrected in April of this year, boosting demand for steel. From a seasonal perspective, due to the sharp decline in demand in the domestic construction steel market in winter, it caused significant losses in the first quarter. Beginning in April, with the recovery of macroeconomic and seasonal demand, domestic steel prices rose more strongly than in the mainland. From another perspective, due to excess domestic supply and demand in the early stages, the company was forced to increase overseas sales, and sales expenses remained high. Sales expenses for tons of steel continued to remain high at more than 200 yuan from the second half of 2018 to the first quarter of this year, but sales expenses for tons of steel fell sharply to 151 yuan in the second quarter, which indirectly indicates that the improvement in domestic supply and demand reduced the outflow of steel. Overall, as downstream demand gradually picked up in the second quarter, driving an improvement in domestic supply and demand, the sales expenses of combined tons of steel were drastically reduced. The company's profit improvement in the second quarter was quite obvious, but due to being dragged down by the first quarter, the overall profit for the first half of the year still declined sharply year on year. In terms of other financial data, during the reporting period, management expenses increased by 40.7% year on year, mainly due to an increase in security and greening expenses; financial expenses fell 23% year on year, mainly due to a reduction in corporate discount costs; the strength of infrastructure recovery remains to be seen: although the government has repeatedly released positive signals about infrastructure construction since the second half of last year, including increasing the issuance limit of local government special bonds, speeding up the issuance of special bonds, and easing capital restrictions. However, judging from the results, infrastructure investment is currently only recovering weakly, which deviates somewhat from strong market expectations at the beginning of the year. At present, the government's subjective intention to stimulate infrastructure has turned positive, but the recovery in infrastructure investment in the second half of the year still depends on improvements in objective conditions such as funding sources. Considering domestic demand's dependence on infrastructure, it will have an important impact on the company's performance; Investment advice: Downstream steel demand has maintained a positive trend since this year, but factors such as the relaxation of environmental production restrictions and the commissioning of production capacity have led to an increase in the supply side of the industry, and the overall profit of the industry declined markedly. As domestic demand improved due to the recovery in infrastructure investment, the company's profit improved month-on-month in the second quarter, and the strength of infrastructure recovery in the second half of the year still needs to be observed. In the future, as demand unfolds during the peak season, the continuation of demand is expected to gradually recover the current pessimistic expectations of the market, and there is room for a rebound in steel stocks. The company's EPS for 2019-2021 is expected to be 0.23 yuan, 0.25 yuan, and 0.29 yuan, respectively. Corresponding PE is 14X, 13X, and 11X, respectively, maintaining an “increase” rating; Risk warning: The recovery in infrastructure investment is lower than expected, and environmental policy risks.