Key investment performance summary: The company released its 2019 annual report. During the reporting period, it achieved operating income of 20.6 billion yuan, an increase of 2.5% over the previous year; achieved net profit attributable to shareholders of listed companies of 110 million yuan, a year-on-year decrease of 84%; and net profit after deduction of 110 million yuan to mother. EPS was 0.07 yuan during the reporting period, and EPS for the single quarter was -0.13 yuan, 0.21 yuan, 0.08 yuan, and -0.08 yuan, respectively. At the same time, the company released a report for the first quarter of 2020, achieving operating income of 3.18 billion yuan, a year-on-year decrease of 19.1%, and net profit of -191 million yuan, or -194 million yuan in the same period last year, equivalent to EPS of -0.12 yuan; tonne steel data: During the reporting period, the company produced 5.52 million tons of iron, 5.8 million tons of steel, and 5.51 million tons of lumber, up 5.7%, 3.4% and 5.4%, respectively. Combined with the annual report data, the price of a comprehensive ton of steel was 3,657 yuan, the gross profit of a ton of steel was 333 yuan, with year-on-year changes of -149 yuan, 28 yuan, and -177 yuan respectively; signs of oversupply and demand were once again showing signs of oversupply and demand in the country: downstream steel demand performance was still strong in 2019, driven by strong real estate, but due to factors such as the relaxation of environmental production limits and the commissioning of production capacity, etc., the supply side of the industry continued to increase pressure. According to estimates, considering the raw material inventory cycle, the average gross profit per ton of hot-rolled plate, cold-rolled plate, rebar, and medium and heavy plate products at the industry level in 2019 was 313 yuan, -23 yuan, 524 yuan, and 193 yuan respectively, down 57%, 106%, 39%, and 70% from the previous year, respectively, and plate performance was relatively weak. Unlike the mainland, domestic construction steel demand structure is mainly based on infrastructure. In 2019, with the frequent introduction of countercyclical regulation policies, the government was strongly willing to grow steadily through infrastructure investment. As the credit environment and capital improved, fixed asset investment in Xinjiang recovered moderately. The gross margins of corporate threads, high-wire, hot-rolled coils, and medium and thick plates fell 2.4%, 1.0%, 7.8%, and 4.6% year-on-year, respectively. The decline was significantly lower than that of sheets, which is basically in line with industry trends. At present, it should be noted that excessive domestic steel supply and demand forced the company to increase overseas sales. This phenomenon occurred in the second half of 2018. As freight rates increased, the company's sales expenses for tons of steel continued to remain high at a high level of more than 200 yuan. Since then, starting in the second quarter of 2019, sales expenses for tons of steel dropped sharply to 151 yuan as demand improved. However, starting in the fourth quarter, it climbed to a high level of more than 200 yuan, which indirectly indicates that the domestic supply and demand relationship declined again, leading to an increase in steel outflow; financial data: during the reporting period, the company's management expenses increased 48% year over year, mainly due to increased investment in new products; financial expenses decreased 15.8% year over year, mainly due to lower discount costs; net cash flow from operating activities decreased by 50% year on year, due to an increase in the scale of operating payments; income tax expenses decreased by 97% year on year, mainly due to the increase in current income tax and deferred income tax As a result of the decline; in 2019, the company calculated a drop in inventory prices of 9.07 million yuan; industry profits are still facing downward pressure: in the short term, the delay in resuming terminal demand due to the pandemic has had a significant impact on the company. The company's production and sales rates of building materials and panels fell to 71% and 86% respectively in the first quarter of 2020. In the medium to long term, the real estate sales cycle, which has already accumulated high pressure to return to the mean, has significant downside risks; infrastructure investment is expected to continue to maintain a moderate upward trend with active fiscal policy support; due to the impact of the epidemic, industrial enterprise profits will continue to decline year-on-year, and with insufficient profit expectations, manufacturing investment is difficult to be optimistic. Overall, it is bad for steel demand, and the downward pressure on industry profits has not abated; investment advice: Affected by the epidemic and cyclical downward pressure on demand, the fundamental risks of the industry have increased. Currently, the supply and demand relationship in the country has shown a downward trend. The company's EPS for 2020-2022 is expected to be -0.17 yuan, -0.07 yuan, and 0.06 yuan, respectively, with a “holding” rating; risk alert: the epidemic has intensified and the macroeconomy has declined.