Highlight 1: Undervalued. Among the four listed companies in Changcai, based on the median performance forecast range, PE is 7.5 times that of Fangda Special Steel, 6 times that of Shaogang and Songshan, 5.6 times that of Sangang, and 6 times that of Liugang. Based on the market value of tons of steel, the market value of a ton of steel at Fangda Special Steel is 3265 yuan, Sangang Minguang is 2,031 yuan, Shaogang Songshan is 1,363 yuan, and Liugang Co., Ltd. is 1,053 yuan. Even considering that some of Liugang's billets are taken out in the form of semi-finished billets, the market value of tons of steel still deviates from the industry average. Highlight 2: Expect higher dividends. The company's dividend payment rates in the past two years were 48% and 33%, respectively. The historical dividend payment rate is high. According to the company's three-year shareholder return plan, this year's dividend payment rate is not less than 30%. Furthermore, at the end of the third quarter, the company had a monetary capital of 7.6 billion dollars, which is capable of paying dividends. At the same time, the company's controlling shareholder's capital expenditure for the Fangchenggang project was high. In the second quarter, the first phase of the project was completed and the second phase of the project started, and cash requirements were high. In summary, I think the company's annual report is expected to continue to have high dividends. According to the minimum dividend payment rate of 30%, the dividend rate is 5%. According to the highest historical dividend payment rate of 48%, the dividend rate of 8% is estimated. Highlight 3: The location advantage is obvious, and the expected performance is high. Affected by the epidemic in the first quarter, steel companies had poor sales, but the company sold nearly one-half of its crude steel to the group in the form of billets. This portion of sales was settled according to the cost addition method, so the company was least affected in the first quarter. More importantly, the company is the largest steel company in South China and Southwest China. South China is a traditional high price area, while there are few migrant workers in the southwest region, and demand is recovering rapidly. Furthermore, the South and Southwest China regions account for a high proportion of electric furnaces, and production of electric furnaces has not yet resumed, so these regions are expected to become the places with the most serious mismatch between supply and demand in the later stages, and the regional premium is obvious. Based on the average price difference between North and South of 300 yuan, the company sells an average of 7.5 million tons of finished materials per year, then the location dividend can reach about 2 billion yuan. Highlight 4: By increasing the capital of Guangxi Iron and Steel Group, investment returns are expected to increase. In December of last year, the company announced a capital increase for Guangxi Steel. After the capital increase was completed, the company accounted for 27.78% of Guangxi Steel's registered capital. Guangxi Iron and Steel is the former WISCO Fangchenggang project. The first phase of the project has a production capacity of 6 million tons of long lumber. It is expected to be put into operation in the second quarter of this year, then the company will add 1.67 million tons of equity production capacity. Based on an estimated net profit of 300 yuan per ton of steel, the annual investment income can reach 500 million yuan after full production. There is still room for further growth after the second phase is put into operation. Investment advice and profit forecast: Affected by the pandemic, we lowered our profit forecast. The company is expected to achieve net profit of 22.41/25.39/2,866 billion yuan in 2019-2021 (original forecast 26.37/29.68/3.162 billion yuan); corresponding EPS of 0.887/0.99/112 million yuan (original forecast 1.03/1.16/1.23 yuan); corresponding PE is 6/5.3/4.7 times; based on the company's historical situation and recent industry conditions, the market is 7 times higher according to the expected performance in 2020 The profit margin raised the target price to 6.93 yuan. The target price increase this time is mainly due to the market's optimistic expectations for economic stimulus in the later stages and is willing to give steel stocks a higher valuation. The company's current valuation is low, dividend expectations are high, and performance continues to grow in the later stages, maintaining a “strong push” rating. Risk warning: Demand recovery is falling short of expectations.