Leading state-owned enterprises in China's special petroleum pipe manufacturing industry have strong competitiveness: according to the Insight Advisory Report, benefiting from (1) the government's policy emphasizing crude oil extraction guarantees, (2) increasing demand for natural gas exploration and production, and (3) the continuous increase in oil and gas field drilling, the sales value of China's special petroleum pipe industry is expected to reach RMB 30.5 billion in 2023, with a compound annual growth rate of 5.6%. Casings are the main type of special petroleum pipes. The sales value of casings as a percentage of total sales value increased from 75.6% in 2014 to 78.0% in 2018, and this percentage is expected to reach 81.0% in 2023. However, China's long-distance oil and gas pipelines are basically built by pipeline companies affiliated with leading state-owned enterprises, which have formed a monopoly on the oil and gas pipeline industry. In 2018, the top two major petroleum pipeline manufacturers in China had state-owned assets, with market shares reaching 22.9% and 21.8% respectively. Pipeline construction tenders generally tend to be companies within the petroleum system with strong competitiveness. The company has been recognized as an authorized seller of China's top three state-owned oil companies since 2001. In terms of operating performance: For the 2016 to 2018 fiscal year and ending June 30, 2019, the company achieved operating income of 750 million yuan, 2.28 billion yuan, 3.09 billion yuan and 1.44 billion yuan respectively. Of these, sales of special petroleum pipes accounted for most of the revenue but showed a downward trend, about 79.5%, 59.1%, 55.2% and 60.7% respectively, while the rapid growth in tube blank revenue accounted for 1.3%, 30.8%, 33.6% and 26.7%, respectively. The company's business portfolio began to adjust and gradually reduce its reliance on the dedicated oil pipeline business; gross margin was different It was 6.2%, 19.4%, 19.1%, and 18.5%. The increase was due to (1) an increase in average sales price due to high market demand for the company's products (2) high usage rate of main production lines, reducing unit manufacturing costs and fixed costs of products, and there was a slight decline in the first half of '19 due to an increase in scrap metal purchase prices; net interest rates were -7.1%, 10.2%, 9.7%, and 8.1%, respectively. Losses were recorded in 2016 due to a relative decrease in favorable market conditions in the petroleum special pipe industry and the allocation of more resources to the company. Valuation: Based on the 1.5 billion shares after the global public sale, the company's market capitalization is HK$2.39 billion to HK$2.75 billion, which is lower than that of its Hong Kong stock peers. The company's price-earnings ratio in '18 was about 7.1-8.2 times, lower than the industry average; in '18, the net price-earnings ratio was about 1.66-1.83 times, lower than the industry average. In terms of profitability, ROE and ROA in 2018 were 36.5% and 10.6% respectively, which is higher than the industry average. Since the price of scrap metal is generally determined by referring to the market price when placing a purchase order, the company may bear the risk of fluctuating scrap prices, plus considering that the company is not competitive enough compared to leading state-owned enterprises in the same industry. Based on the company's industry position, performance, and valuation level, we gave it a score of 58 and rated it as “no subscription”. Risk warning: (1) market competition risk, (2) increase in raw material costs, (3) risk of changes in government policies