Matters: The company announced its 2019 annual report and performance forecast for the first quarter of 2020. In 2019, we achieved operating income of 48.6 billion yuan, an increase of 2.68% year on year; net profit attributable to shareholders of listed companies was 2.35 billion yuan, a year-on-year decrease of 49.09%. Basic earnings per share were $0.9157. It is proposed to distribute a cash dividend of $0.45 (tax included) per share. Comment: Business situation: 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, up 2.52%, 4.50%, and 5.69% year-on-year respectively, and the capacity utilization rate was further improved. The average sales price of the company's finished materials in 2019 was 3,478 yuan (month-on-month -128 yuan). With production and sales rising and selling prices falling, the company's revenue rose slightly. Gross profit and expenses: In 2019, the company's gross profit was 4.7 billion yuan (-45% year over year), and the gross profit margin was 9.7% (-4.7%). The overall gross profit of the company declined as sales prices fell and costs increased. In addition, the company's R&D expenses in 2019 reached 1.4 billion yuan, an increase of 1,133 billion yuan compared to 2018, a significant increase. According to the company's annual report, R&D projects and R&D volume increased significantly over the same period last year, mainly due to increased technological innovation efforts in 2019. Dividend situation: The company plans to distribute a cash dividend of 4.50 yuan (tax included) to all shareholders for every 10 shares, with a total cash dividend of 1,153 billion yuan, accounting for 50.77% of net profit attributable to shareholders of listed companies, with a dividend rate of 9.05%. According to the “Shareholder Return Plan for the Next Three Years (2019-2021)” formulated by the company, the profit distributed in cash each year is not less than 30% of the distributable profit attributable to shareholders of the listed company achieved in that year. The high dividend ratio can continue for the next two years, and the value is prominent in an environment of declining interest rates. First quarter results forecast: The company expects net profit attributable to shareholders of listed companies in the first quarter of 2020 to decrease by 208 million yuan to 255 million yuan compared with the same period last year, a year-on-year decrease of 54.31% to 66.58%, a significant decrease. Demand in the construction industry fell sharply in the first quarter due to the epidemic. The company mainly focused on long timber, which was seriously affected. The construction industry resumed work in the second quarter, and some construction sites will rush to make up for earlier progress, and the company's performance will rebound somewhat. Investment advice and profit forecast: We expect the company to achieve net profit of 25.33/27.21/2,982 billion yuan in 2020-2022; the corresponding EPS is 0.99/1.06/1.16 yuan, respectively; the corresponding PE is 5/4/4 times. Based on the company's historical situation and the recent state of the industry, a price-earnings ratio of 7 times was given according to the expected performance in 2020, the target price was maintained at 6.93 yuan, and the “strong promotion” rating was maintained. Risk warning: Construction intensity in the construction industry falls short of expectations.