Investment Rating - The industry investment rating is Neutral [7] Core Insights - The report emphasizes that selecting undervalued stocks may effectively mitigate the uncertainties on the demand side, especially as the steel industry faces increased short-term demand risks. Leading steel companies that previously enjoyed premium valuations due to strong market positions and growth potential have seen significant declines in both valuation and performance during the industry's bottoming process. Current valuation levels are at the cycle's bottom, providing a strong margin of safety. Even with demand pressures, the extent of valuation retraction may be limited if macro expectations improve compared to last year [2][4][5]. Summary by Sections Demand Side Analysis - Recent uncertainties in the steel demand side have increased due to seasonal effects and intensified trade frictions. The construction sector is experiencing order suppression due to high temperatures and rainfall, while the manufacturing sector faces indirect export pressures from tariff announcements. The apparent consumption of major steel products has decreased by 2.67% year-on-year and 1.82% month-on-month [5]. Supply Side Analysis - The average daily pig iron output has decreased to 2.4161 million tons, continuing a downward trend, but the reduction is limited. The total steel output has dropped by 5.25% year-on-year and 2.85% month-on-month. The report highlights the need to monitor the pace of production cuts as the industry enters the off-season [5]. Inventory and Price Trends - Inventory reduction has slowed due to weakened demand, with a week-on-week decrease of 0.70%. The total inventory of long products has decreased by 31.20% year-on-year, while flat product inventory has decreased by 14.88% year-on-year. Current prices for rebar and hot-rolled steel have dropped by 70 yuan per ton, with rebar priced at 3070 yuan per ton and hot-rolled steel at 3160 yuan per ton [6]. Investment Opportunities - The report suggests focusing on long-term undervalued state-owned enterprises like Baosteel and companies with strong shareholder returns such as Nanjing Steel and CITIC Special Steel. It also highlights the potential of low valuation and performance bottoming companies like Hualing Steel and New Steel, as well as opportunities in mergers and acquisitions [25].