Incident: The company released its 2019 annual report, achieving operating income of 48.620 billion yuan, a year-on-year increase of 2.68%, and net profit to mother of 2,347 billion yuan, a year-on-year decrease of 49.09%. It is proposed to distribute a cash dividend of $4.5 (tax included) for every 10 shares, with a dividend ratio of 8.91% and a dividend rate of 49.14%. In 2019, the company's iron, steel and steel production reached 12.46 million tons, 13.67 million tons, and 8.09 million tons respectively, with year-on-year increases of 2.52%, 4.50% and 5.69%, respectively. Comment: Full-year results declined, but profitability improved in the fourth quarter. The company's annual revenue and net profit growth rates were 2.68% and -49.09%, respectively. Prices of raw materials increased and demand was sluggish in '19. Performance declined due to systemic risks in the industry. The comprehensive gross profit margin and net profit margin for the whole year were 9.76% and 4.83% respectively. Compared with the previous three quarters, they increased by 0.71 and 0.61 percentage points, respectively. The profit level for the fourth quarter has improved. The decline in earnings throughout the year was mainly due to rising raw material costs, as well as increased sales and R&D expenses. The company's sales cost ratio increased by 4.63 percentage points in 2019, mainly due to a 13.84% increase in the cost of raw materials; the sales rate doubled due to the large increase in railway transportation expenses; the company continued to deepen fine management, focus on reducing costs and increasing efficiency, and increase R&D. The company is expected to maintain steady operation in anticipation of steady downstream demand in 2020. Participated in Guangxi Iron and Steel's Fangchenggang Steel Base project, optimized product structure and enhanced location advantage. In 2019, the company participated in Guangxi Steel's Fangchenggang Steel Base project. The products of this project mainly include high-strength rebar, alloy steel bars, high-quality wire, hot-rolled wide strip steel, cold-rolled sheets, hot-rolled sheets, hot-dip galvanized coils and other steel for construction, automotive, machinery and other industries. The project is expected to be fully completed and accepted in January 2021. After commissioning, it will help the company improve the existing product supply system and further optimize the product structure to meet the diverse needs of customers. Investment advice: The company is a core subsidiary of Liugang Group, one of the world's top 50 steel companies. It is expected to maintain steady operation by continuously improving its business structure, improving quality and efficiency through fine control. EPS is expected to be 0.57/0.61/0.62 in 2020-2022, and the corresponding PE is 8.9/8.3/8.1, respectively. Maintain an “Overweight” rating. Risk warning: demand for steel has dropped sharply, and raw fuel prices have fluctuated greatly