Event: The company released a performance forecast announcement for the first half of 2018. It is expected to achieve net profit of 900 million yuan to 1.05 billion yuan during the reporting period, an increase of 3142%-3682% over the previous year; net profit after deducting non-return mother is 881 million yuan to 1,031 million yuan, an increase of 4104%-4819% over the previous year. The performance exceeded market expectations. Comment: 2018 Q2 results are close to a record high. 2017Q3-2018Q1, the company has achieved net profit of 949 million yuan, 624 million yuan, and 129 million yuan respectively. 2018Q2 is expected to achieve net profit of 771 million yuan to 921 million yuan. Performance is close to the historical high of 2017 Q3, and there has been a significant increase compared to 2017 Q4 and 2018 Q1. On the one hand, thanks to the deepening of the country's supply-side reforms, steel prices have maintained a relatively high level of operation; on the other hand, the company has achieved remarkable results in improving environmental protection. It continues to reduce costs and increase efficiency, and the impact of production restrictions is gradual. Weakened, and production and sales volume showed an upward trend. A fixed increase in capital raising reduces liabilities, and the capital structure is expected to improve. On May 14, 2018, the company issued a fixed increase plan. It plans to issue non-public shares to the controlling shareholder Angang Steel Group. It will raise no more than 2.5 billion yuan in capital, all of which will be used to repay bank loans and other interest-bearing liabilities. It has now been approved by the Henan Provincial State Assets Administration Commission and approved by the shareholders' meeting. If this fixed increase is successfully implemented, financial expenses are expected to be reduced by 110 million yuan/year, and the balance ratio is expected to drop by 7.6 percentage points to 71.1%. In the context of industry turmoil, companies with excellent cash flow and endogenous growth deserve particular attention. We have always emphasized that the overall demand in the steel industry is expected to be flat in 2018, but supply is flexible, which will cause the industry as a whole to fluctuate. Anyang Steel is one of the few steel mills that has had a positive free cash flow for 5 consecutive years. In 2018, the company's crude steel production plans to increase by 21.4% to 9.03 million tons, ranking first among listed steel mills in China. This kind of company is particularly worth looking forward to in the context of a volatile market. Investment advice: Maintain an “overweight” rating. Based on the company's impressive performance in the first half of 2018, which exceeded market expectations, and the strong performance of steel prices, we slightly raised our profit forecasts for 2018-2020. Net profit for 2018-2020 was 20.69, 20.20, and 1,986 billion yuan (previous values were 18.68, 18.72, and 19.00 billion yuan), corresponding to EPS of 0.86, 0.84, and 0.83 yuan/share (previous values were 0.78, 0.78, and 0.79 yuan/share), the current stock price corresponding to PE in 2018 is only 4.3 times, maintaining “growth” Keep a “hold” rating. Risk warning: 1) There is a risk that environmental production restrictions will increase and the company's output will decline; 2) the company may relocate; 3) demand for steel falls short of expectations, and there is a risk that steel prices will decline.