CZMZ announced its 2017 preliminary result with headline numbers on 23 Jan2018. The company delivered RMB3.5bn revenue and RMB544mn NPAT in 2017,or 27.5% and 11.6% increase on a year-over-year basis. The preliminary NPATwas c.8% below DBe, or c.9% lower than A-share consensus due to subpar yieldof wet processed separator capacity expansion commenced in 3Q17, given stablebusiness performance of the company's other 2 business units - traditional plasticpipes and BOPA film. In the mid-term, we believe the wet processed separatorproduction lines with designed capacity of 105mn sqm should be able to ramp upand provide margin support for the company. CZMZ is scheduled to release thefinal 2017 results on 23 Mar 2018, and we look forward to having more detailsthen. Maintain Buy.

FY17 preliminary results beat consensus and DB estimates. Baosteel announced its 2017 full year preliminary results after market close onJanuary 25. The company estimated 2017 full year NPAT to be from RMB19.1to 19.8bn. This beats both DB and Bloomberg consensus, achieving c. 135%FY17 DBe and 117% Bloomberg 2017 full year estimates. The preliminaryresults should be viewed positively by the market and potentially trigger streetanalysts to further upgrade their estimates into 2018. Supply-side structural reform and Baowu synergy drove profit growth. The supply-side structural reform in 2017 significantly improved the supply anddemand dynamics of steel sector in China. The synergy from Baowu mergerand Zhanjiang project also increased the company’s productions and profitswith strong cost advantage compared to industry peers. We believe that themerger synergies will likely continuously be realised and are likely to lead tostrong profitability of Baosteel in coming years. Positive supply and demand dynamics, maintain Buy. Based on the preliminary results, the implied 2017 ROAE is c.12-13%,increased by c. 6 percentage points from last year. We believe furtherimprovement into 2018 is still highly likely due to the impacts from ChinaSupply Side Reform and synergies from the Baowu merger. That makesBaosteel's current valuation at 1.1x 2018DBe BVPS not demanding in our view. Meanwhile, from recent Baosteel's communications with investors, we don'trule out the possibility of cash dividend pay-out increase resulting from thecompany's strong free cash flow yield. Overall, we deem Baosteel as the realalpha of Chinese steel sector. Buy reiterated.

Production capacities may go up in 2018 Baosteel expected the steel industry to release more production capacities in2018because the de-capacity target for 2018in China at 25mtpa is only halfof the target for 2017at 50mtpa. The company’s new EAF productions and thecompleted capacity replacement projects may drive its production capacities togo up in 2018. The main capacity replacement projects are Phase I (c.4mtpa) andPhase II (c.4mtpa) of Rizhao steel mill in Shandong Province. Phase II will be putinto operation in the second half of 2018according to the company. Mild price correction and continually resilient spread in 2018 In 2017, overcapacity cut and winter production shutdown policy affected steelcompanies’ production capacities and the commencement of new construction,which drove the steel price to largely increase. The rebar price particularlyexceeded RMB5,000/t in December 2017with gross profit margin at c.RMB1,500/t. Thus, price correction began at end-2017and may continue in 2018. Baosteelexpected the rebar price to drop by RMB800/t from the current price level. As theeffects of the government policies that were executed in 2017may extend into2018, the company expects a mild price correction and guided steel spread tostay relatively resilient with stable annual average selling price in 2018. Long steel profits may not have premium over flat steel profits in 2018 Long steel was overall more profitable than flat steel in 2017. However, thissituation is contradictory to the demand trends of long steel and flat steel. Marketdata showed a stable trend of flat steel demand from auto and home applianceindustries and a declining trend of long steel demand from infrastructure andproperty industries. Thus, the outlook of flat steel in 2018should be more positivethan long steel. Long steel profits may not have premium over flat steel profitsin 2018. Ramping up EAF may become a trend In 2017, IF furnace was fully replaced by EAF and BF. Although the governmenthas not promulgated policies to promote EAF, Baosteel started EAF productionduring 2017(2mtpa in 2018). The industry’s EAF capacities should remain thesame at 15mtpa in 2018. The company’s production output of EAF in 2018willbe higher than 2017because of the full-year operation in 2018.

9M17 results beat consensus and DB estimates. Baosteel announced its 9M17 results after market close on October 27. For thefirst three quarters, the company has recorded revenue at 252.1bn and NPATat RMB 11.7bn. The result beats both DB and Bloomberg consensus, achieving80.7% FY17 DBe and 82.8% Bloomberg 2017 full year estimates. Meanwhile,for 3Q17 alone, Baosteel’s NPAT was RMB5.5bn, 130% up QoQ. We believethe results should trigger street analysts to upgrade their estimates. Strong cost reduction; Wugang turnaround and synergy starts to surface. The company’s sales volume in 3Q17 came at 11.5mt, down 4% QoQ. Baosteel’s products 3Q17 GP/t increased by RMB 317.5/t QoQ. The cost ofgoods sold in 3Q17 decreased by 8.0% QoQ. Baosteel reported a costreduction of RMB17.2bn in 3Q17 alone or RMB55.4bn for 9M17(compare toFY2015 cost level) and might overachieve its full year cost reduction target ofRMB60bn. Meanwhile, the company also reported that its newly acquiredWugang assets have turned around to be profitable with 3Q17 NPAT atRMB855m. Meanwhile, the merger synergy also start to surface and contributeRMB770mn of profits. Outlook remains positive, maintain Buy. Winter pollution measures in northern China will likely keep 4Q17 steel D/Stight and Baosteel's operations being all in southern China are among thebeneficiaries. We also believe the good profitability of the steel industry willlast into 2018 as we explains in our report: 2018 should be just as good;conviction Buy, published on September 5, 2017). Baosteel is currently tradingat 11.8x 2017DBe NPAT and 1.1 PBx. With upcoming synergy to be deliveredand great profitability to be maintained, we think the valuation isundemanding. Buy re-iterated.

1H17results should be in-line with consensus Baosteel announced its 1H17results after market close on August 24. In 1H17,the company has recorded revenue of RMB170.1bn, RMB 8.51bn for operatingprofit, and NPAT of RMB 6.2bn. The company’s bottom line reached 42.1%FY17DBe and 48.1% Bloomberg 2017full year estimates. We believe the1H17results is in-line with consensus but disappointed DBe as a result oflower-than-expected GP/t. 2Q17GP/t down RMB325/t, but our full year forecast remains intact The company’s shipment volume in 2Q17came at 12mt, up 12% QoQ. 2Q17.ASP dropped RMB350/t QoQ, in line with market price movement for flat steelproducts. Baosteel’s steel products 2Q17GP/t dropped by RMB325/t QoQ,which compressed GPM to 10.4% in 2Q17from 16.3% in 1Q17. With QTDHRC spread (as a proxy for steel plate profitability) already improved byc.RMB400/t, we remain comfortable with our FY17NPAT estimate ofc.RMB14bn given the optimistic profitability outlook for 2H17. Our FY17DBeNPAT is currently 12% above Bloomberg consensus. Outlook remains positive, maintain Buy We expect profitability improvement in 3Q17for Baosteel due to upcomingpeak demand season driven by seasonal recovery in auto production.Meanwhile, winter pollution measures will likely keep 4Q17D/S of steel markettight (Details in our report: Undervalued structural changes, reiterating Buy forsteel sector, published on 18July 2017). These will likely play out to be thecatalysts to let Baosteel’s profitability remain upbeat. Thus, we maintain ourBuy rating for Baosteel.

1H17 results in line with both DBe and Bloomberg consensus Cangzhou Mingzhu announced its 1H17 results after market close on 18 July 2017. The Company posted revenue of RMB1.63bn in 1H17, achieving 54% FY17DBe and 51% full year Bloomberg consensus. It delivered 1H17 NPAT of RMB284.9m, accounting for 49% FY17DBe and 46% full year Bloomberg consensus. 1H17 results are in line with both DBe and Bloomberg consensus. Major beneficiary of strong EV growth in China, Buy reiterated We believe Cangzhou Mingzhu should be the major beneficiary of strong EV growth in China, as the Company is aggressively expanding separator capacity three-fold till 2019 to catch up with strong demand from EV battery supply chain at a CAGR of 30%, aiming to increase its global separator market share from 4% in 2016 to 6% in 2019. This accounts for c.25% of gross profit in 2017, rising to 41% by 2019E and underpins our positive outlook on the Company. Supported by recent strong momentum of China EV shipment (up 48% YoY in June), reiterating Buy.

New TP pursuant to stock split We adjusted our TP of Cangzhou Mingzhu to RMB15.2 pursuant to its 17 for 10 share split.

Aggressive expanding separator and mild improving pipe; initiating with Buy Separators: expanding capacity three-fold to catch up with strong demand CZMZ is expanding separator capacity three-fold to catch up with strong demand from EV battery supply chain at a CAGR of 30%. This accounts for c.25% of gross profit in 2017, rising to 41% by 2019E and underpins our positive outlook on the company. Separately, it has a consistently strong plastic pipe business (c.40% of gross profit) which will benefit from coal-to-gas switch projects and may increase volume at a CAGR of c.15% in the next three years. The BOPA business (c.35% of gross profit) will likely see profitability decline but the strong separator and pipe operations should boost its bottom line at 21%/13% YoY in FY17/18E. We initiate coverage with a Buy. Separators: expanding capacity three-fold to catch up with strong demand We believe that the separator industry will continue to face a supply shortage over the next few years due to strong demand and a lack of quality producers, able to provide large scale volume. CZMZ has decided to increase its capacity three-fold by 2019, increasing its global market share from 4% in 2016 to 6% in 2019. Although pricing for industrial separators could continue to decline, CZMZ is likely to maintain high margins above 50% in the next three years, with: 1) cost cuts from technology improvements and economies of scale; and 2) more value-add through coating. Pipe business: a major beneficiary of ‘coal-to-gas switch’ projects The traditional plastic pipe business grew at 25% YoY in 2016, when ‘coal-to-gas switch’ projects were being constructed in Northern China to deal with the smog issue. CZMZ may continue to be one of the major beneficiaries of ‘coal-to-gas switch’ projects in the next three years due to: 1) geographic advantage within the c.500km transportation radius of plastic pipes; 2) capability of providing a full set of pipe products including connectors, which require higher manufacturing technology; and 3) strong client relationships. High visibility growth with a CAGR of 17% 2017-18E; initiating with Buy The BOPA business has outperformed since 2016, the result of an unbalanced market demand/supply after the exit of a major player. However, we believe that super high profitability will revert back to the historical long-term average level of c.15% when more supply is added. Despite this, the strong expanding separator and improving pipe business should boost the bottom line at CZMZ with a CAGR of 17% in 2017-18E and keep ROEs c.20%. We set our target price at RMB26, based on 25x FY18E EPS, which is the average of lithium battery components industry, implying 24% upside potential. Major risks: significant EV subsidy policy changes; capacity expansion being slower than expected (cf p.5).

Earnings forecast to grow at CAGR of 70% in FY17-19, initiating with Buy. Aggressive capacity expansion to catch up with downstream demand Easpring is one of the largest cathode producers in China, focusing on producing NMC (lithium nickel manganese cobalt oxide). The company plans to aggressively expand NMC capacity at its Jiangsu factory in the next three years to catch up with the strong industry demand for NMC. We believe Easpring will be able to maintain high profitability, due to its capability to regularly research and launch leading cathode products like 622/811 NMC. We estimate earnings to rise from c.RMB100m in 2016 to c. RMB500 in 2019E, generating a 3Y CAGR of c.70%. Current trading prices imply 31x/20x FY17/18E EPS. We initiate coverage of Easpring with Buy. Aggressive capacity expansion to catch up with downstream demand. We forecast that global cathode demand for lithium batteries will rise from c.200kt in 2016 to c.400kt in 2019, a 3Y CAGR of 23%. Among all major cathode types, we estimate that NMC demand could rise the quickest, registering a 3Y CAGR of c.45%, due to a structural change in demand. See our FITT report, “Supplying the charge - evaluating the battery component sector” published on 6 June, 2017. In order to catch up with strong downstream demand, Easpring has shifted its focus from LCO (lithium cobalt oxide) to NMC since 2015 and plans to aggressively expand its total capacity from 8ktpa in 2016 to 31ktpa in 2020, mainly for NMC, at its factory in Jiangsu. Stable profitability stemming from continuous launch of leading products. Easpring should be one of the key beneficiaries of the structural industry demand shift to NMC from LFP (lithium iron phosphate). For Easpring, NMC sales volume accounted for c.75% of total cathode shipments in 2016. This proportion should rise further, as more NMC production lines are built and ramped up. We also believe Easpring should be able to stabilise its profitability by: 1) researching and launching leading products (622/811 NMC and NCA) with higher ASP; and 2) lowering unit costs stemming from leading technology and higher utilisation rates, due to a better product mix. Earnings CAGR of c.70% over 2017-19E; initiating with Buy; risks. The machinery business, acquired by Easpring in 2015, should remain a high-margin division, but we estimate that its gross profit contribution could drop from c.30% in 2016 to c.10% in 2019, due to the fast-growing cathode business. Overall, we expect Easpring’s earnings could grow from c.RMB100m in 2016 to c.RMB500m in 2019, implying a 3Y CAGR of c.70%. We use P/E methodology in view of fast earning growth and set our TP at RMB21, 25x FY18E DBe EPS, the average the lithium battery components industry implying ~24% upside potential. Risk: significant China EV policy changes (p.3).

Strong 1Q17 results reported. Baosteel reported FY16 and 1Q17 results on 28 April 2017. Considering thatBaosteel already announced preliminary FY16 results on 18 Jan 2017, webelieve its FY16 earnings should be a non-event. The company’s 1Q17 revenuereached RMB85bn, achieving 26% Bloomberg consensus. A strong 1Q17NPAT of RMB3.79bn was delivered, reaching 32% Bloomberg consensus. Considering that this is the first result after the merger, Bloomberg consensusmay not be comparable. Early win synergies emerged. Baosteel managed to generate strong profitability. Its EBITDA/t of 1Q17reached RMB1083/t. We believe the strong profitability should be contributedby not only the improved steel spread, also the emerging M&A synergy. Givenindependent EBITDA/t records of Baosteel and Wuhan Steel before the merger,together with steel spreads we tracked, it should be a struggle for post-mergerEBITDA/t to reach RMB1000/t. The synergy emerging at initial stagedemonstrated an early win in our view. Strong earnings of 2017 expected. Baosteel’s profitability in 2Q17 may decline as the avg. 2Q17 QTD HRC spreadhas deteriorated by c.RMB250/t than that in 1Q17. However, we forecastindustry profitability is likely to recover in 2H17 and beyond. See our report“Reading through Chinese HRC volatilities” published on 21 April, 2017. Adding up the increasing synergy with the continuous integration and furtherramp-up of Zhanjiang project (Zhanjiang project has already started tocontribute profit in 1Q17, earlier than previous expectation), we believe theremay not be too much discrepancy to map full year earnings by annualizing firstquarter bottom line. We expect Baosteel should be able to realize ROAE ofc.10% in FY17.URemain optimistic about long term industry structural change, Buy reiterated. Baosteel is currently trading at 0.8x FY17DBe BVPS. The valuation isundemanding, given an expected ROAE of FY17 at c.10%. The sustainablestructural change in China steel industry should be able to improve overallindustry utilization rate and profitability in the long term, we reiterate Buy onBaosteel.

FY1H17 preliminary results in line with both DBe and Bloomberg consensus. Ganfeng Lithium announced FY1Q17 results after market close on 27 April 2017. Its 1Q17 revenue was RMB625m, down 5.75% YoY, and its NPAT was reported at RMB136m, up 27.03% YoY. Ganfeng also gave guidance on preliminary 1H17 NPAT between RMB473m to RMB612m, in line with both DBe and Bloomberg consensus, by achieving 45%~58% FY17DBe and 45%~59% of full year Bloomberg consensus. Improved self-sufficiency should boost the bottom line from 2Q17. Ganfeng’s Mt Marion delivered the first shipment of 15kt spodumene concentrates in Feb. We believe the increasing spodumene delivery should significantly escalate the raw material self-sufficiency rate, decrease the avg cost and then improve the profitability. Ganfeng expected that its 1H17 NPAT should arrive at c. RMB473-612m, up 70%-100% YoY. New take or pay deal signed. Ganfeng announced the purchase of no more than a 5% share of the Pilbara project for US$20m. In addition, Ganfeng obtained a take or pay deal of 160ktpa (20kt LCE) spodumene annual shipment after June 2018. We previously pointed out that Ganfeng may still have a slight mismatch of processing capacity and raw material supply capacity (13.5kt LCE shortage of supply in 2019E), assuming that Mt Marion project can fully ramp up. See our report “China Lithium Industry” published on 10th Apr 2017. The new take-or pay deal is likely to fulfill the shortage. Secured raw material supply for aggressive capacity expansion, Buy reiterated . We are optimistic about significant improvement in Ganfeng’s bottom line in the next three years, due to 1) increasing processing capacity from 30ktpa in 2016 to 72ktpa in 2019E and 2) secured raw material sources. Buy reiterated.

FY16 results in line with both DBe and market consensus. Ganfeng Lithium released FY16 annual results after market close on 11 April. The Company reported revenues of RMB2.84bn, up 110% YoY; achieving100% DBe and 97% Bloomberg consensus. The Company also deliveredstrong FY16 NPAT of RMB464m with 271% surge YoY, reaching 98% DBe and92% consensus estimates. Ganfeng Lithium announced cash dividend ofRMB0.1 per share. New largest Chinese convertor in 2019 expected. Ganfeng’s FY16 overall earnings results were in line with our expectation. However, it seems the volume of off-take agreement with Albemarle washigher than our expectation while the off-take agreement ASP and unit COGSwere lower than expected. We believe the off-take agreement impact willgradually fade away when new raw material supply from Mt Marion, its JV inAustralia, start to increase delivery in 2017. We expect Ganfeng to be thelargest Chinese convertor in 2019 with strong volume expansion from c. 27ktpa as of 2016 year end to c.64ktpa in 2019. Limited dilution impact from issuing CB. Ganfeng announced to issue no larger than RMB950m convertible bond beforethe end of 2017 to finance three projects previously announced. The threeprojects are 15ktpa lithium carbonate project, 20ktpa lithium hydroxide projectand 0.6Gwh lithium battery project. Though the interest rate of the CB has notbeen decided, the conversion price is settled as the average stock trading price20 days before the conversion date. Assuming conversion price at RMB43 pershare, Ganfeng expected total number of shares outstanding would increasefrom 729m to 751m as of 2018 year end, implying c. 3% dilution effect. Thehigher the conversion price is, the less the dilution effect. Issuing US$500m bond to expand overseas business. Ganfeng also planned to issue a 3yr US denominated bond with no larger thanUS$500m in Hong Kong in the next 12 months. Considering the amount of thisbond is huge and use of proceeds is to support overseas business, we believean asset acquisition is possible. The details of this US bond remain to be seen. Strong volume growth expected, Buy reiterated. We like Ganfeng on its volume growth in 2017-2019. Please see our ChinaLithium Industry report, “Downgrading Tianqi on demanding valuation”,published on April 10th, 2017. In addition, new raw material supply from MtMarion should help to decrease cost and improve per tonne gross profitsignificantly. We expect Ganfeng’s bottom line should grow at a CAGR of 65%in the next three years. Buy reiterated.

Strong FY16 preliminary earnings. Baosteel announced FY16 preliminary earnings on 17 Jan 2017. PreliminaryNPAT was indicated as being c. RMB8.8bn, up 770% YoY. This result wouldbeat both DB and market consensus, achieving 121% DB and 115%Bloomberg consensus estimates respectively. Baosteel has not announced anyquantitative details to explain the strong 4Q performance yet. Positive FY17 Outlook, Reiterated Buy. We believe Baosteel is likely to maintain its strong profitability on the back of1) China government’s continuous efforts for supply side reform, and 2)ongoing industrial restocking. Please see details in our report “Asia SteelIndustry – 2017 Outlook – ready for sustainable re-rating” published on 17 Jan,2017.

9M16 results imply higher costs; yet more capacity to be ramped Ganfeng's 9M16 results are lower than DBe. Its COGS is higher than ourexpectations due to price hikes for raw materials from SQM and Albemarle.Thus, we need to factor in these potential higher costs into future COGS.Ramp-up of Ganfeng’s own mining investment, Mt Marion, should help tomitigate cost hikes in coming years. Ganfeng's capacity expansion of 20ktpalithium hydroxide, announced in July, should boost sales volume in 2018 andbeyond. After factoring higher costs and higher volume in coming years, ournew DCF-derived TP is RMB39.2, implying 26% upside potential; maintainingBuy. Disappointing 9M16 results resulting from higher-than-expected costs Ganfeng Lithium announced its 9M16 results after market close on 24 October.Its 9M16 revenues arrived at RMB2bn, up133% YoY and its bottom linereached RMB486m, up 474% YoY. However, its NPAT disappointed ourestimates, only reaching 57% FY16E, although its NPAT was in line withBloomberg consensus. Details of the results are in Figure 1. Meanwhile,Ganfeng also gave guidance on FY16 NPAT at RMB626~688m. Ganfeng’sCOGS is higher than our original assumption. We believe cost hikes should becontributed by high-cost feedstocks from SQM and Albemarle. We also believethat overall COGS of Ganfeng’s lithium compounds and metals have increasedc. 50% YoY in 2016 and higher COGS will likely sustain into coming years. Capacity expansion will likely grow sales volume in 2018 Ganfeng Lithium announced a capacity expansion of 20ktpa lithium hydroxideon 8 July. We believe Ganfeng’s new capacity should be well supplied forfeedstocks in 2018, as Ganfeng’s Mt Marion project in Australia should be ableto supply enough spodumene concentrates to Ganfeng Lithium’s hydroxideplant. As for Mt Marion’s ramp-up situation, the mine has pushed itsoperations start by about one quarter to early 2017. Once Mt Marion is rampedup, we believe Ganfeng’s profitability should see some improvement. DCF-based TP at RMB39.2; maintaining Buy; major risk lithium price correction Based on our new adjustments for its costs and longer-term volume growth,our new DCF-based TP (WACC of 8.6% with a cost of equity of 10% and aterminal growth rate of 3%) is set at RMB39.2, implying 26% upside potential.Ganfeng is trading at RMB31, implying 33x/19x FY16/17E EPS. We believe thevaluation is not demanding in the A-share market. Major risk: significantcorrection for lithium price.

9M16 results missed DBe, but FY16 guidance in line with DBe Guoxuan High-tech announced its 9M16 results after market close on 26 Oct2016. Its total revenue arrived at RMB3,423m, up 128% YoY and its NPATarrived at RMB738m, up 122% YoY. Though the 9M16 results were strong, itmissed both DBe and market consensus for achieving 69% FY16DBe and 63%Bloomberg consensus, respectively. We believe disappointing 3Q16 earnings isa result from slow EV shipment in China market due to subsidy fraudulence.Guoxuan gave 2016 full year guidance at RMB1,023m ~1,198m in line with ourFY16DBe of RMB1,064m. Strong GPM, but deteriorated balance sheet and cash flow Guoxuan recorded an impressive gross profit margin of 49% in 3Q16,improved from 2Q16’s 44% and 1H16’s 47%. We believe the improvementsprings from product mixture. Further explanations from the management areneeded. Guoxuan increased its investments in 3Q16 for capacity expansion.Cash outflow from investments was RMB1,453m in 3Q16, while cash inflowfrom operation was only RMB68m. Company’s net cash significantly droppedfrom RMB1,454m as of the end of FY15 to only RMB52m as of the end of3Q16. In addition, Guoxuan’s AR/AP/Inventory days further climbed from336/507/165 as of 2Q16 to 469/717/216 days as of the end of 3Q16.Furthermore, we also see a financial cost hike as a result of larger loans. 4Q16 re-acceleration of earnings momentum, Buy reiterated Company’s FY16 guidance should imply that Guoxuan will need to run at fullcapacity in 4Q16. Considering that China EV/battery shipments by yearendmight be strong to achieve the government's target, we believe Guoxuan'sbattery capacity fully booked for 4Q16 is indeed possible. As such, Guoxuan’s4Q16 earnings should reaccelerate, in our view. We maintain our Buy rating inlight of this re-acceleration. Currently, Guoxuan is trading at 29x/22xFY16/FY17DBe EPS and our TP for Guoxuan is RMB40.4, implying 14.5%upsides.