The leading enterprise in Xinjiang, a complete and high-quality production system company, is the only listed steel company in Xinjiang and the steel company with the strongest overall strength. The company has a complete and high-quality iron making, steelmaking and rolling steel production system, and has an annual production capacity of 6.6 million tons of iron, 7.3 million tons of steel, and 7.7 million tons of material. The company attaches great importance to scientific and technological innovation. Among them, the number of patent applications of the company has always ranked first in the autonomous region. The physical quality of the company's leading products has reached the internationally recognized standard for high-precision products, and the products have won the title of famous brand of the autonomous region many times. In Q1 2020, the company's steel production was 1.1038 million tons, up 7.38% year on year; steel sales volume was 890,900 tons, a year-on-year decrease of 17.07%; achieved operating income of 3.175 billion yuan and net profit of -191 million yuan. The company has a high market share and location advantage in the Xinjiang region as its core sales area, and also radiates northwest and central Asia, closely monitors local and surrounding market demand and product price changes, implements differentiated competitive strategies, makes economic comparisons of production capacity and production line configurations, and flexibly organizes production arrangements. The products have a high brand awareness in northwest Xinjiang and northwest China. In 2019, the company's domestic market share of panels reached 77%, and the domestic market share of building materials was 34%. The company has now built a sales network throughout Xinjiang, which can provide users with one-stop variety services, personalized customization services and steel deep processing services. The company actively adapts to the “Internet +” development trend and builds a fast and efficient electronic trading platform. Belt and Road infrastructure drives growth. On April 21, 2020, Eight Steel Company and the actual controllers China Baowu and Huabao Investment jointly invested 1 billion yuan to establish Xinjiang Tianshan Iron and Steel Joint Co., Ltd. Among them, Eight Steel Company has pledged a capital of 500 million yuan, with a shareholding ratio of 50%; China Baowu has pledged a capital of 250 million yuan, with a shareholding ratio of 25%; and Huabao Investment has pledged a capital of 250 million yuan, with a shareholding ratio of 25%. China Baowu produced 95.22 million tons of steel in 2019, with total operating revenue of 556.6 billion yuan and total profit of 34.52 billion yuan. Steel production and profit level ranked first in the world. There were a total of 390 key projects in Xinjiang in 2020, including 190 renewal projects, 80 new construction projects, and 120 preparatory projects. 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 and Forming a New Pattern in the New Era”, which specifically states that the joint construction of the “Belt and Road” will be the lead and increase the openness of the western region. Support Xinjiang to speed up the construction of the core area of the Silk Road Economic Belt and form a westbound transportation hub, trade, logistics, culture, science, education, and medical service center. The company's growth has ushered in a strong driving force. Company Rating We expect the company's revenue for 2020-2022 to be 216.43/229.42/23.859 billion yuan, respectively, and net profit to mother of 7.64/88,739 million yuan, respectively. We gave the company 10.73 times the target PE in 2020, with a corresponding market value of 8.198 billion yuan. For the first coverage, we gave a target price of 5.35 yuan, giving it a “buy” rating. Risk warning: macroeconomic policy changes, western development policy changes, other uncontrollable risks in company operations, etc.