Baosteel 1H15 NPAT in line; reiterating Buy。 Baosteel announced its 1H15 results after market close on 24 August, 2015. Revenue was RMB81bn, down 17% YoY, implying 98% 1H15 DBe, 48% FY15DBe and 43% Bloomberg consensus. Its 1H15 NPAT reached RMB3.2bn, up1% YoY, implying 109% 1H15 DBe, 47% FY15 DBe and 48% Bloombergconsensus. As Baosteel’s NPAT is almost in line with market consensus, webelieve that these 1H15 results will not surprise the market. Please find theresults summary tables in the following pages. Better-than-expected ASP/cost control help improve average unit gross profit. Baosteel reported average ASP in 1H15 as RMB 4,019/t (down 14.5% YoY),much less than the HRC benchmark (down 25% YoY). By successfullycontrolling costs, Baosteel’s average unit gross profit climbed to RMB588/t, up4% YoY and 9% HoH, albeit the average benchmark price and steel spread(HRC) dropped to c. RMB1,065/t for 1H15, down 12% YoY and 20% HoH,respectively. Meanwhile, Baosteel has done well promoting sales volume in1H15, up 1% HoH and down only 5% YoY, in line with our estimates. Steady sales volume in line with expectations. In addition to cost control, we also believe that Baosteel effectively managedits steel product mix. Key products of Baosteel, HRC and CRC enlarged theirgross profit on a HoH basis. Only medium plates recorded negative gross profitin 1H15. We will wait for management to disclose the sales volumebreakdown by products in order to better understand whether production mixmanagement is as important as its cost control for its 1H15 results. Reiterating Buy on Baosteel; major risk. Steel spread is running on the trajectory of a historical low level in 1H15. Weexpect 3Q15 profitability to continue under pressure, but it could recover in4Q15. We believe that the current share price has already priced in theseconcerns. Baosteel’s 1H15 results have demonstrated its excellent corporategovernance, which could help to strengthen its leading position in the Chinesesteel industry. We derive our target price of RMB11.5 based on 1.6X 2015EBVPS. The target PB multiple is justified by the average of Baosteel’s A-sharepeers. Downside risks: dramatic Chinese policy changes. We reiterate our Buyrating for Baosteel.