The development of the western region brought benefits and was upgraded to the “increase in holdings” rating. On May 17, 2020, the Central Committee of the Communist Party of China and the State Council issued the “Guiding Opinions on Promoting Western Development in the New Era to Form a New Pattern” (hereinafter referred to as the “Guiding Opinions”). Among them, opinions such as “strengthening infrastructure planning and construction” and “strengthening the construction of open major corridors” all covered infrastructure investment in the western region, including Xinjiang. Furthermore, the progress of construction of key projects in the country is improving, which is expected to boost demand for steel in the country. Bayi Steel is the leading steel company in China. It accounted for 47% of the domestic market in 2019, and completing the integration of production capacity in China is one of the strategic tasks of the controlling shareholder Bagang Steel Company in 2020, so the company is expected to benefit. Therefore, we raised the company's performance forecast. We expect the EPS for 20-22 to be 0.10/0.11/0.12 yuan (previous value was 0.06/0.07/0.08 yuan), and upgraded to the “increase in holdings” rating. The western development policy continues, and we are optimistic that the “Guiding Opinions” on infrastructure investment within the country will further stabilize expectations that the western development strategy will continue to advance, effectively guaranteeing the strength of infrastructure investment in the western region, including Xinjiang. According to the Xinjiang Development and Reform Commission, a total of 390 key projects were arranged in 2020, and it is planned to complete an investment of more than 260 billion yuan in that year; of these, 190 renewal projects, including pre-construction projects, including the G312 Hutubi-Manas Highway project, have been halted in the early stages. In addition, the resumption of work and production in Xinjiang is relatively good. By the end of March, all 190 key renewal projects had started, one month earlier than in previous years. According to the National Bureau of Statistics, in April 2020, fixed asset investment and sub-investment in construction and security projects in Xinjiang increased by 29.1% and 37.5% year-on-year in the same month, all significantly better than the national average (0.8% and 0.7%). The cement shipment rate in Xinjiang is relatively high. Demand for steel may be improving. According to Wind, the average price of thread (20mm) in Urumqi in May was 3,862 yuan/ton, up 267 yuan/ton, all higher than the month-on-month increases of 93 and 132 yuan/ton in Shanghai and Lanzhou during the same period; from March 12 to May 8, the price of cement (42.5 bulk) in Urumqi rose 5 yuan/ton. Shanghai fell 16 yuan/ton and Lanzhou rose 59 yuan/ton during the same period, or indicated that demand in the western region was improving. According to the Digital Cement Network, the cement shipment rate for Urumqi and Aksu on May 29 was 35% and 45% (YOY+15pct, +20pct). Steel prices are rising, cement prices are strong, and shipping rates are high. We think the construction situation in the country may be improving. 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. As of 2019 (end), the company has a crude steel production capacity of 7.3 million tons, an output of 5.8 million tons, and Bagang Steel has a crude steel production capacity of 10 million tons; in 2019, China's crude steel production capacity is 12.37 million tons. If the integration work is carried out smoothly, the domestic supply and demand pattern is expected to improve. Demand for steel use is improving, and the western development policy has been upgraded to a “increase in holdings” rating. Combined with the relatively good construction progress of key projects in Xinjiang, there is a clear upward trend in steel demand in the Xinjiang region; furthermore, the company's controlling shareholders are expected to integrate domestic production capacity and improve the supply and demand pattern, so the profit forecast was raised. EPS for 20-22 was 0.10/0.11/0.12 yuan. The average value of PB (2020E) of comparable companies was 0.92 times. Considering the improvement in demand for steel in the country, the company was given a PB valuation of 1.20-1.25 times. BPS (2020E) was 2.80 yuan, and the target price was 3.36-3.50 yuan, which was upgraded to the “increase in holdings” rating. Risk warning: Policy implementation falls short of expectations, macroeconomics falls short of expectations, and project progress falls short of expectations.