Net profit for 2019 was -84% year-on-year, 20Q1 loss. On April 27, the company released its 2019 annual report and 2020 quarterly report: it achieved operating income of 20.61 billion yuan (yoy +2.5%) in 2019; net profit attributable to shareholders of the parent company was 110 million yuan (yoy -84.1%). 20Q1 achieved operating income of 3.18 billion yuan (yoy -19.1%, qo-38.0%), net profit attributable to shareholders of the parent company -190 million yuan, 19Q1 and 19Q4 respectively -190 million yuan and -130 million yuan respectively. Considering the impact of the pandemic, we expect the company's 2020-22 EPS to be 0.06, 0.07, and 0.08, maintaining a “neutral” rating. 2020Q1 In 2019, the company's steel production and sales volume decreased by 551 and 5.53 million tons (yoy +5%, +8%), respectively. The average prices of building materials and boards were 3526 and 3,617 yuan/ton (yoy-104, -167 yuan/ton), less than local steel prices in Xinjiang; in the same period, the company's steel gross profit was 333 yuan/ton (yoy-168 yuan/ton). In 20Q1, the company's steel production and sales volume were 1.1 million and 890 million tons (yoy +7%, -17%), respectively. Affected by the epidemic, steel sales declined, and the gross profit of steel was 113 yuan/ton (yoy-21 yuan/ton). In 20Q1, the company's expenses and expenses for the period were 300 million yuan and 9.6% (yoy-0.2 billion yuan, +1.4 pct, q-130 million yuan, +1.0 pct), respectively. The absolute value of expenses decreased year-on-year and month-on-month. Controlling shareholders may integrate domestic production capacity, which is expected to improve the supply and demand pattern in Xinjiang. According to China Baowu News, on April 17, the chairman of Baowu Group pointed out that in 2020, Baogang Company will prioritize the integration of production capacity in China. On April 21, Baogang Company, the controlling shareholder of the company, Baowu Group and Huabao Investment jointly invested 1 billion yuan to establish Xinjiang Tianshan Iron and Steel Joint Co., Ltd., holding 50%, 25%, and 25% of shares respectively. We believe that the establishment of this company may be an important step for Bagang Steel Company to integrate domestic steel production capacity, and that the domestic supply and demand pattern is expected to improve. By the end of 2019, the company's crude steel production capacity was 7.7 million tons, and Bagang Steel Company was 10 million tons; according to the National Bureau of Statistics, China's crude steel production in 2019 was 12.37 million tons. Optimistic about infrastructure in the country this year, demand for construction steel may increase. According to the National Bureau of Statistics, fixed asset investment and infrastructure investment in Xinjiang in 20Q1 were +5.2% and +8.5% year-on-year respectively, compared to -9.1% and -21.7% in the same period last year. According to the Xinjiang Daily, the number of construction projects in Xinjiang reached 2,000 in 20Q1, +6.4% year-on-year, and the actual funding for projects with a total planned investment of 50 million yuan or more was +14.2% year-on-year. The overall number and progress of construction projects was higher than during the Lunar New Year. We believe that the warmer temperatures in Q2 and Q3 are suitable for the commencement of construction. This is the peak season for traditional steel demand in the country, or to further promote demand for steel. Annual performance was under pressure. Maintaining a “neutral” rating Due to the impact of the pandemic, we lowered the company's profit forecast. The BVPS for 2020-22 is expected to be 2.76, 2.83, and 2.91 yuan (pre-2020-21 values of 3.05 and 3.32 yuan), corresponding to PB 1.10, 1.08, and 1.05 times. The average value of PB (2020E, Wind unanimous expectations) for comparable companies is 0.93. Considering that the company is a leading steel company in China, the company was given a valuation of 1.10 to 1.15 times PB in 2020, corresponding to the target price of 3.04 to 3.18 yuan, maintaining a “neutral” rating. Risk warning: The macroeconomic downturn exceeded expectations; domestic and foreign demand fell short of expectations; and the epidemic exceeded expectations.