Report summary: Baosteel Packaging is a leading domestic metal packaging company. Its main products are two-piece cans and printed iron business (two-piece cans accounted for 80.55% of revenue in 2019). It has a production capacity of about 1.1 million tons of two-piece cans, a market share of 19%, and a production capacity layout in many places at home and abroad. Two-piece can industry: The margin between supply and demand improved markedly, and the industry boom rebounded upward. 1) In 2016-2018, the industry boom continued to decline due to the rapid expansion of production capacity and rising raw material prices in the previous period. However, in recent years, there has been no significant expansion in the total production capacity of the industry (about 58 billion cans), and factors such as beer canning have catalyzed an increase in demand, driving the capacity utilization rate to recover from 68% in 2016 to 81% in 2019, and the supply and demand pattern has returned to equilibrium. 2) Thanks to industry-leading mergers and acquisitions and the withdrawal of foreign capital in recent years, market concentration has improved dramatically (CR4 in 2019 about 61%). Since 2019, the price increase for two-piece cans has been implemented in an orderly manner. Under the overall stable price of raw aluminum, the profitability of two-piece cans has ushered in an upward recovery period. 3) Looking at the growth history of leading overseas companies, epitaxial mergers and acquisitions are the only way to grow. PE can reach 30X center (TTM) during the rapid expansion period. Company: State-owned enterprise reforms have advanced, and performance has entered a new period of high growth. 1) Deeply bind high-quality customers and expand production capacity in an orderly manner. The company deeply binds with high-quality customers and promotes production capacity expansion in an orderly manner. It is expected to increase production capacity by more than 2 billion cans in the next two years (accounting for 20% of current production capacity). 2) Promote mixed reform and improve operational efficiency. The company launched an equity incentive plan in October 2018. In May 2019, it was announced that it was included in the state-owned enterprise reform as a “double hundred enterprise”. Recently, production capacity expansion and capital operation have accelerated markedly, and business potential is expected to be unleashed. 3) Profitability is lower than that of peers, and upward repair flexibility is outstanding. The company's net interest rate in 2019 was 2.2%, lower than COFCO Packaging and Orekin (about 4%-7%). Subsequent net interest rates are expected to recover to the center of the industry and increase profitability. Furthermore, the company actively explores the Southeast Asian market and can also effectively contribute to profits. Profit forecast and investment suggestions: As the industry and company sentiment increase, Baosteel Packaging will enter a new round of high performance growth. EPS is expected to be 0.26, 0.39, and 0.48 yuan respectively in 2020-2022 (not considering the impact of fixed increases on profit), corresponding to PE of 25.91/17.79/14.14X, maintaining the purchase rating. Risk warning: Downstream demand falls short of expectations, profit growth falls short of expectations due to fluctuations in raw material and product prices, and valuation increases fall short of expectations.