Performance summary: The company released its report for the third quarter of 2019. In the first three quarters, it achieved operating income of 94.29 billion yuan, an increase of 4.1% over the previous year; realized net profit attributable to shareholders of listed companies of 1.78 billion yuan, a decrease of 47% over the previous year; and net profit attributable to shareholders of listed companies was 1.76 billion yuan, a decrease of 47% over the previous year. The EPS for the first three quarters of this year was 0.17 yuan, and the EPS for the single quarter was 0.03 yuan, 0.08 yuan, and 0.06 yuan respectively; profit for the third quarter declined month-on-month: since this year, although downstream steel demand performance has remained steady, driven by strong real estate, etc., the supply side of the industry has continued to increase due to factors such as the relaxation of environmental protection production restrictions and the replacement and commissioning of production capacity, etc., and industry profits have declined sharply. Judging from some listed steel companies that have recently disclosed their results, most companies' net profit declined by 40%-75% year-on-year in the first three quarters. The company's three main production bases are all located in production restricted areas. In 2018, due to environmental production restrictions, production was suppressed, costs increased, and performance was hampered. With the relaxation of production restrictions, the company's steel production has increased since this year, but against the backdrop of a weakening of the overall supply and demand relationship in the industry, the increase in production can only offset part of the decline in performance. In the third quarter, taking into account factors in the raw material inventory cycle of steel companies, the impact of the rapid rise in iron ore prices in June on profits was reflected in July. At the same time, the macro expectations for August deteriorated sharply under the double pressure of deteriorating external environment and tightening internal real estate financing. Pessimism exacerbated the rapid decline in steel prices, and the company's profit for the third quarter fell 23% month-on-month. In terms of financial data, notes receivable increased by 92% compared to the beginning of the year. The main reason is that the proportion of notes receivable in refunds from sales has increased, and the second is that accounts payable use other payment methods; long-term loans have decreased by 52% compared to the beginning of the year; asset impairment losses have decreased by 100% year-on-year, mainly due to the fact that there have been no asset impairment losses in the current period; the balance ratio is expected to decrease: on March 11, the company issued an announcement that it plans to distribute to all shareholders at a ratio of no more than 3 shares for every 10 shares placed. The total capital raised will not exceed 8 billion yuan. The net amount after deducting issuance fees will not exceed 8 billion yuan. All of it is used to repay the company's interest-bearing liabilities. The company's balance ratio has remained above 70% for a long time, and is at a relatively high level in the industry, leading to high financial expenses. Through this allotment, the balance ratio is expected to drop to 67.7%, which will help reduce financial risks and raise profit levels. The company's allotment application materials were accepted by the China Securities Regulatory Commission on June 28; pay attention to the impact of environmental production restrictions during the heating season: the low interest rate environment is compounded by low inventories. Real estate investment is expected to remain strong in the fourth quarter. Active fiscal policies continue to gain strength, and the weak recovery in infrastructure continues. Overall, steel demand is worry-free throughout the year, supported by real estate. Furthermore, the environmental production restriction policy, which has been relaxed for nearly a year, has recently been tightened, the supply side has been controlled to a certain extent, and the profit side of the industry is expected to rise steadily. Recent research shows that the latest production limit plan for mid-late October introduced in Tangshan has basically been implemented, and the impact of subsequent production restrictions during the heating season on the company's production still needs to be observed; investment suggestions: The implementation of the future allotment plan will effectively solve the company's long-standing high balance ratio problem and raise the level of profit. Downstream demand in the industry is still steady. Environmental production limits have been tightened recently, and industry profits are expected to stabilize with strong supply and demand. Steel stocks have a chance to rebound in the context of macroeconomic expectations, but at the same time, we need to pay attention to the impact of production restrictions on the company's production activities. The company's EPS for 2019-2021 is expected to be 0.23 yuan, 0.24 yuan and 0.26 yuan respectively, and the corresponding PE is 11X, 10X, and 10X respectively, maintaining the “increased holdings” rating; Risk warning: Expectations of a macroeconomic downturn, increased risk on the supply side, and environmental production limitation risks.