Performance month-on-month to improve again. In the first three quarters of 2023, against the background of weak demand from the industry and relatively strong raw fuel prices, the Company deepened cost reduction and efficiency enhancement, and exerted the advantage of "one body, four elements and one chain", resulting in better profit performance than the industry. The operating income was 56.365 billion yuan, up 7.07% year-on-year, and the net profit attributable to the mother was 1.665 billion yuan, down 19.83% year-on-year. In the third quarter, the operating income in a single quarter was 19.447 billion yuan, up 2.24% month-on-month, and the net profit attributable to the mother was 676 million yuan, up 10.32% month-on-month.

Upgrade product structure and strengthen cost transmission ability. The Company continued to increase investment in research and development, deeply cultivated the advantages of thick plate, and strengthened the research and development of special steel long products, so that the quantity and price of high value-added products increased simultaneously. In the first three quarters, the sales volume of special steel products of the company was 2.383 million tons, up 11.6% year-on-year; the sales volume of medium and heavy plates was 3.953 million tons, up 10.4% year-on-year; the sales volume of construction threads was 1.426 million tons, up 0.8% year-on-year. In terms of products, the price toughness of medium and heavy plates and special steel is obviously better than that of construction threads, and the cost transmission capacity is relatively dominant.

The coke project is progressing steadily. The Company actively expanded its ecology around the steel industry chain, and relevant achievements gradually emerged.

Overseas projects with an annual output of 6.5 million tons of coke have been promoted in an orderly manner. At present, Indonesia Jinrui New Energy annual output of 2.6 million tons of coke project, 1 #, 2 #, 3 #coke oven has been put into operation, 4 #coke oven is building furnace; Indonesia Jinxiang New Energy 3.9 million tons of coke project, 1 #, 2 #coke oven has been ignited oven drying, 3 #coke oven has been equipped with oven drying conditions, 4 #coke oven is building furnace, other coke ovens and their supporting facilities are advancing construction in sequence. In the first three quarters, Indonesia Jinrui New Energy sold 1.0684 million tons of coke, realizing operating income of 2.772 billion yuan and net profit of 103 million yuan.

The tender offer was actively promoted. On April 2,2023, Xinye Steel, Nangang Venture Capital, Nanjing New Industrial Investment and Nangang Group jointly signed the strategic investment framework agreement and capital increase agreement. Xinye Steel plans to invest 13.58 billion yuan to increase capital of Nangang Group. After the relevant capital increase is completed, Xinye Steel will hold 55.25% equity of Nangang Group and become the controlling shareholder of Nangang Group. On the same day, Nanjing Iron and Steel Group issued a notice to Fosun High-tech and its subsidiaries to exercise the right of preemption. On the same day, the aforementioned parties jointly signed the equity transfer agreement, and Nanjing Iron and Steel Group purchased 60% equity interest of Nanjing Iron and Steel Union from the transferor. Upon completion of the foregoing matters, Nanjing Iron and Steel Group will hold 100% equity interest in Nanjing Iron and Steel Union and indirectly hold 59.10% equity interest in the Company through Nanjing Iron and Steel Union Co., Ltd., a wholly-owned subsidiary of Nanjing Iron and Steel Union Co., Ltd. At present, relevant lawsuits have been withdrawn and mediation has been reached respectively. Xinye Steel, Nanjing Iron and Steel Group and relevant parties are actively promoting various work.

Risk hints: the demand side has declined more than expected; the intensity of production control is not as strong as expected; the fluctuation of raw material prices is higher than expected; the progress of project construction is not as expected; the indirect controlling shareholder intends to change.

Investment suggestions: the company is an old plate leading enterprise, special steel long products rapid development, coke project orderly progress. We maintain the original performance forecast. It is estimated that the company's revenue from 2023 to 2025 will be 774.3/831.1/863.4 billion yuan, with a year-on-year growth rate of 9.6%/7.3%/3.9%, and the net profit attributable to the parent company will be 23.5/25.8/27.6 billion yuan, with a year-on-year growth rate of 8.6%/9.9%/7.1%; Diluted EPS is 0.38/0.42/0.45 yuan, and the PE corresponding to the current stock price is 10.0/9.1/8.5x, maintaining the "overweight" rating.