The company's revenue in 2019 was 48.620 billion yuan, up 2.68% year on year; net profit was 2,347 billion yuan, down 49.09% year on year. The company decided to distribute a cash dividend of 4.5 yuan for every 10 shares, with a cash dividend ratio of 49.14%. Under the influence of the global pandemic, terminal demand in the steel industry is gradually peaking, and industry profits are expected to continue to be under pressure in the future. Maintain the “Overweight” rating. In 2019, the company's production and sales rose, and profits declined. In 2019, the company produced 12.46 million tons of iron, 13.67 million tons of steel, and 8.09 million tons of lumber, up 2.52%, 4.5%, and 5.69% respectively from the previous year. The company achieved gross profit of 614.08 yuan per ton of steel, down 31% from last year, and the company achieved gross profit of 128.81 yuan on billet sales, up 5.87% year on year. Although the company's profitability declined year over year, the company's gross profit base was still significantly higher than the industry average due to the natural superiority brought to the company by geographical location. Expenses increased during the period, and the debt ratio declined slightly. The company's gross margin in 2019 fell to 9.76% from 14.39% in 2018, slightly higher than the gross margin level of 8.97% in 2017. The decline in profitability was mainly driven by the industry. The core was the sharp rise in iron ore and the rapid release of industry production, which eroded profits. The company's annual expenses rate was 4.12%, up 1.54 percentage points from the previous year. The corresponding period expenses for tons of steel increased from 55 yuan to 147 yuan. Affected by the increase in railway freight, sales expenses increased by 104.95% year on year; R&D expenses rose sharply by 423.72%, accounting for 2.88% of revenue. The asset structure improved slightly, and the debt ratio fell to 57.1% from 57.8% at the end of 2018. The dividend ratio has risen to the highest level in recent years. While the company has achieved steady performance in recent years, it has increased its dividend ratio. The 2019 dividend ratio was 49.14%, the highest dividend ratio in the past 9 years. Based on the closing price on April 15, the static dividend rate was 8.9%. Due to the impact of the COVID-19 pandemic, the results for the first quarter of 2020 were drastically reduced. The company expects net profit from net profit of 54.31% to 66.58% year-on-year in 2020Q1. The main reason is that Q1 was affected by the epidemic, and the company's phased sales volume and price declined due to a sharp decline in demand. Due to the gradual recovery of downstream demand after March, we expect the company's profit to improve month-on-month in the second quarter, and the decline in profit will narrow. Risk factors: The global crisis has led to a sharp decline in domestic and foreign steel demand; the overseas epidemic has returned to China. Investment advice: Considering the impact of the global pandemic on the steel industry, we lowered the company's EPS forecast for 2020-21 from the previous 0.86/0.91 yuan to 0.66/0.57 yuan, and added the 2022 EPS forecast of 0.58 yuan. Under the influence of the epidemic, steel exports and downstream demand for plate materials have been greatly impacted. Furthermore, we judge that there is a risk that demand for steel for real estate will gradually trend weaken after the second quarter, and the overall profit of the steel industry will remain under pressure in the future. Companies with similar product structures were compared, and the company was given a PB valuation of 1.2 times in 2020, corresponding to the target price of 5.56 yuan, maintaining the “increase in holdings” rating.