Core Viewpoint - The company has shown a significant improvement in net profit attributable to shareholders in the first half of 2025, with a notable enhancement in the gross margin of ordinary steel and carbon steel products compared to stainless steel products. The demand for stainless steel remains positive, indicating no need for excessive pessimism [1]. Financial Performance - In the first half of 2025, the company achieved a revenue of 45.967 billion yuan, a year-on-year decrease of 7.54%. However, the net profit attributable to shareholders was 0.393 billion yuan, an increase of 0.254 billion yuan year-on-year. The decline in raw material prices was greater than the decline in steel prices, leading to improved profitability for ordinary steel products. The net profit forecasts for 2025-2026 have been raised to 0.847 billion and 0.974 billion yuan respectively, with a new forecast for 2027 at 1.112 billion yuan [2]. Product Margin Analysis - The company's overall gross margin for the first half of 2025 was 2.59%, an increase of 0.55 percentage points year-on-year. The gross margins for stainless steel, ordinary steel, and ordinary steel billets were 2.35%, 2.37%, and 6.13% respectively, with year-on-year increases of 0.12, 1.09, and 3.83 percentage points. The improvement in profitability for ordinary steel products was more pronounced than for stainless steel, primarily due to a larger decline in raw material prices compared to product prices [2]. Market Trends - The average price of hot-rolled carbon steel sheets in the first half of 2025 decreased by 14.5% year-on-year, while the prices of key raw materials like iron ore and coking coal fell by 14.4% and 41.8% respectively. In contrast, the average prices of stainless steel 304 cold plates and hot rolls decreased by 4.0% and 5.3%, while the price of high nickel iron, a key raw material for stainless steel, increased by 2.1%. This indicates that profitability for stainless steel products has not shown significant improvement [3]. Strategic Outlook - The company is committed to a differentiated competition strategy, with over 60% of sales coming from unique, high-margin, and strategic products. Projects such as high-end cold-rolled oriented silicon steel and high-end stainless steel alloy materials are progressing well, with completion rates of 86.09% and 97.59% respectively. As these new projects come online, the product structure is expected to continue to optimize [3]. Demand for Stainless Steel - According to Mysteel data, the apparent consumption of stainless steel in China from January to July 2025 was 19.3618 million tons, reflecting a year-on-year increase of 3.47%. Although the growth rate of stainless steel demand has slowed, it remains positive, suggesting that there is no need for excessive pessimism regarding stainless steel demand [3].

Group 1 - In 2024, China's crude steel production is projected to reach 1.005 billion tons, accounting for over 50% of global output, solidifying its position as the world's largest producer [1] - Despite high production levels, Chinese steel companies lag significantly in profitability compared to Japanese firms, with the top four Chinese steel companies' net profits combined being less than that of Nippon Steel [3] - Nippon Steel, despite producing only 39.64 million tons of crude steel in 2024, has managed to achieve higher profits than Chinese counterparts, highlighting a stark contrast in profitability [3] Group 2 - Cost control is a critical factor, with iron ore accounting for 40% to 50% of steelmaking costs; Nippon Steel has secured long-term low-price contracts with major miners, while Chinese companies rely heavily on imported iron ore, leading to higher costs [5] - Japanese steel companies focus on high-value specialty steel, with over 20% of Nippon Steel's production being specialty steel, while Chinese companies have only 12.31% of their production in this category, primarily producing lower-margin ordinary steel [5] - Chinese steel companies are making efforts to innovate, with advancements in producing specialized steel products, supported by government initiatives aimed at improving the industry [7] Group 3 - The current situation of "large but weak" and low profits in the Chinese steel industry indicates a need for transformation, emphasizing the importance of profitability over sheer production volume [8] - To compete effectively in the global steel market, Chinese steel companies must learn from Nippon Steel and transition from being "large producers" to "profit-making experts" [8]