Net profit from 20Q1 reduced losses. The regional pattern is expected to improve in the medium to long term. The company's 20Q1 revenue is 380 million yuan, YoY -20%; net profit is 16.96 million yuan, which is narrower than the same period last year - 55.18 million yuan. Net profit after deducting non-return to the parent is 36.62 million yuan, which is also a decrease from the same period last year - 74.58 million yuan. The company's non-recurring income is mainly government subsidies and financial asset income. The net inflow of operating cash was 120 million yuan, a decrease from the net inflow of 170 million yuan in the same period last year, but a positive inflow was achieved. Mengxi's implementation of a false peak replacement is conducive to the medium- to long-term improvement of the supply and demand pattern in the company's core market and is expected to break the regional price ceiling. Therefore, we raised the company's 20-22 EPS to 2.00/2.32/2.55 yuan (1.74/1.85/1.99 yuan before adjustment) to maintain the “increase in holdings” rating. In 20Q1, cement sales may drop by 30%, and prices have increased year-on-year. The company is the largest cement manufacturer in Ningxia. The 2019 annual report revealed that it accounted for nearly 50% of the market share in Ningxia. By the end of 2019, the company's clinker production capacity was about 15.1 million tons, with Ningxia, Inner Mongolia and Gansu accounting for 5:3: 2. According to data from the National Bureau of Statistics, the cement production in Ningxia, Gansu and Inner Mongolia in January-March 2020 was 108, 3.4, and 790,000 tons, respectively, and YoY -29%/-14%/-46%. We estimate that the company's sales of cement clinker in the 20Q1 off-season fell by about 30%. According to digital cement network data, the average cement price in Ningxia increased by about 6% year on year from January to March 2020. In 20Q1, the company achieved a comprehensive gross profit of 75 million yuan, YoY -21%; and a comprehensive gross profit margin of 19.8%, a year-on-year decrease of 0.3 pct. The stoppage of work due to the pandemic boosted the management expense ratio, and continued to push for debt reduction and deleveraging in the 20Q1 period, with a year-on-year increase of 3.7pct; of these, the sales expense ratio was 12.6%, a slight decrease of 0.4 pct over the previous year; the management expense ratio was 21.0%, an increase of 5.1 pct over the previous year, due to the pandemic, production stoppage losses and increased maintenance costs. Benefiting from business exceeding expectations and increased monetary capital in 2019, the company repaid part of its short-term loans in 20Q1, and the interest-bearing debt balance at the end of the period was 400 million yuan, a sharp decrease of 700 million yuan over the previous year; the balance ratio at the end of March was 20.4%, which continued to drop 1.2 pct from the end of 2019. The company's 20Q1 financial expense ratio was 0.6%, down 0.9 pct year on year. Benefiting from VAT refunds and social security relief, the company achieved other revenue of 33.59 million yuan in 20Q1, an increase of 30.72 million yuan over the previous year. Low storage levels help push up prices. Alternate peaks and replacements are expected to break regional price bottlenecks. According to the digital cement network, the price of high-standard cement in Ningxia and Gansu was 350 yuan/415 yuan including tax on Friday, both up 20 yuan from the beginning of the year. The storage capacity ratio was 55%/40%, respectively. Low inventory levels are compounded by demand, and prices are expected to rise. According to our analysis in our report on March 30, 2020, “Replacing Mismatched Peaks in Mengxi, Promoting Regional Pattern Optimization”, four traditional cement companies, including Wuhai Horse Racing Cement, will implement false peak production with five electric slag clinker companies in Wuhai and surrounding regions. This will help ease the pressure on production capacity in regions such as Mongolia, Ningxia, and Shaanxi, and benefit the company's core market prices in the medium to long term. The false peak replacement is expected to improve the regional supply and demand pattern. The 20-22 performance forecast was raised due to the introduction of Mengxi's wrong peak replacement policy at the end of March. We raised the company's cement price forecast for the company's core production area, and raised the company's net profit for 20-22 to 9.6/11.1/1.22 billion yuan (8.3/88/95 billion in 20-22 years before adjustment). Currently, it corresponds to 6.9xPE and 1.0XPb in 2020, which is lower than comparable company Wind's unanimous expectations of 7.8xPE, 1.4XPb. Considering that low inventory levels in the northwest and wrong peak replacement are conducive to increasing price elasticity, the company was approved for 8-9xPE in '20, with a target price of 16.0-18.0 yuan, and a “increase in holdings” rating. Risk warning: The price of cement in Mengxi, Ningxia has dropped sharply, and accounts receivable have risen sharply.