Valin: Downstream demand has been stable and orders sufficient since Q2. Operating performance improved slightly on a QoQ basis from Q1 in April-May.

When asked, "Has the company's operating performance in Q2 2025 improved compared to Q2 of last year?", Valin responded on the investor interaction platform on June 30th: Since Q2, the company's downstream demand has remained stable, with sufficient orders. The operating situation in April and May has slightly improved compared to Q1 on a MoM basis.

In response to the question, "Considering that the company's major shareholder's stake ratio is lower than that of peers such as CITIC Special Steel, Baosteel, and Nangang Steel, is the company considering conducting roadshows targeting large domestic private steel mills or foreign steel mills? How does the company view peers' practices of enhancing market value management through significant equity investments in Valin?", Valin responded on the investor interaction platform on June 30th: The company actively promotes itself to various investors, fully showcasing its solid fundamentals. If there are any relevant arrangements, the company will promptly fulfill its information disclosure obligations.

When asked, "Considering the significant cyclical fluctuations in the steel industry (such as the impact of macroeconomic cycles and supply-demand relationships on profitability), why hasn't the company smoothed out the risks of a decline in its main business through securities investments? Additionally, based on a deep understanding of the industry, does the company plan to allocate a certain proportion of its investment portfolio to peer companies?", Valin responded on the investor interaction platform on June 30th: The company focuses on refining and strengthening its main steel business, pursuing steady operations and continuously enhancing the competitiveness of its main business. It adopts a cautious attitude towards securities investments.

In response to the question, "Against the backdrop of an industry downturn, many steel companies are actively adjusting their sales strategies by increasing the proportion of direct sales, enhancing market control, reducing costs in intermediate links, and thereby improving profitability. As a top-tier enterprise in the industry, the proportion of direct sales revenue in Valin's total operating revenue has fluctuated in recent years due to the growth of trade revenue. I would like to ask if there is still room for improvement in the company's direct sales ratio under the current market environment? If so, what measures does the company plan to take to achieve this goal?", Valin responded on the investor interaction platform on June 30th: In recent years, after excluding trade business, the proportion of the company's direct sales revenue has exceeded 60%, remaining relatively stable. The company continues to promote the upgrading of its product mix, with the sales proportion of key varieties of steel continuously increasing to 65%. There is still room for further improvement after the commissioning of projects such as electrical steel. All key varieties of steel are sold directly.

When asked, "The company's performance is impressive, demonstrating strong development potential. I would like to know how the market perceives the current communication content during institutional surveys. In subsequent exchanges, it is recommended that the company not only showcases its achievements but also directly addresses challenges such as intensified industry competition and fluctuations in raw material prices, enabling the market to have a more comprehensive understanding of the company's development situation. In addition, as a top-tier enterprise in the industry, will you arrange for high-level executives such as the CFO and core business executives to participate in surveys in the future, to engage in in-depth exchanges with institutions from a professional perspective, strengthen market communication, and enhance the effectiveness of market value management?" Valin responded on the investor interaction platform on June 30: "China's steel industry possesses global competitiveness. Downstream demand has shown significant differentiation. Enterprises with technological innovation advantages and evident transformation results can still maintain good profitability and possess long-term development potential. However, there are currently prominent issues such as supply-demand imbalance and upstream raw material challenges, which are often mentioned by the company during interactions with investors. In addition to the board secretary's office, the company's management also communicates with investors irregularly. In the future, the company will continue to promote more interactions between the management and the capital market.

On June 26, Valin answered a series of questions from investors on the interaction platform, stating that the company actively monitors investment opportunities upstream and downstream of the steel industry's industry chain. If there are arrangements for establishing special investment funds, the company will promptly fulfill its information disclosure obligations. In addition, Valin also stated: "Variety steel is a steel product that combines technical thresholds and excess profitability under the management's perspective. Its scope will be dynamically adjusted based on downstream demand. In recent years, the proportion of variety steel sales has been increasing year by year, accounting for 60%, 63%, and 65% respectively from 2022 to 2024. In the future, with the completion and full production of Phase I and Phase II of the electrical steel project, there is still room for improvement in the company's variety steel sales and proportion. The company's main production sites are located in inland areas with a shortage of coal and ore, which are at a disadvantage in logistics and transportation costs compared to coastal steel enterprises. Therefore, since its establishment, the company has consistently adhered to a differentiation strategy, targeting the direction of demand transformation and upgrading in China's industrial steel sector, continuously increasing investment, and promoting the transformation and upgrading of the variety structure towards high-end. Comparing with several top-tier publicly listed steel firms, the company's capital expenditure intensity per unit scale is at a similar level to each of them.

On June 23, Valin stated on the investor interaction platform that since the beginning of this year, the steel industry has still faced a relatively severe operating environment, with supply-demand imbalance remaining prominent and steel prices continuing to decline. However, the company's performance in the first quarter improved significantly, with cost reduction and efficiency enhancement being one of the important reasons.

According to Valin's Q1 2025 report, in the first quarter of this year, the company achieved a total operating revenue of 30.23 billion yuan, down 18.40% YoY; net profit attributable to shareholders was 562 million yuan, up 43.55% YoY.

Valin's Q1 report shows: In the first quarter of 2025, the supply-demand imbalance in the steel industry remained prominent, and steel enterprises faced severe challenges in production and operation. However, downstream demand in the steel industry improved MoM. The company maintained its strategic focus, actively aligned with market demands, seized opportunities, and vigorously promoted cost reduction and efficiency enhancement initiatives. After maintenance, some blast furnaces operated well, with improvements in economic and technical indicators. Its subsidiary, Valin Xiangtan Iron and Steel, successfully developed copper-steel clad plates, becoming the first domestic steel enterprise to master the full-process copper-steel rolling and cladding technology. Valin Lianyuan Iron and Steel successfully rolled out DX51D-RC50 cold-rolled galvanized sheets with a scrap ratio exceeding 55%, achieving a carbon dioxide emission reduction of over 34% and making another significant breakthrough in the field of green and low-carbon smelting technology for long-process steel production. Yangchun New Iron and Steel completed the assessment, monitoring, and public disclosure of ultra-low emissions for both organized and unorganized sources. The robotic dog of Valin Lianyuan Iron and Steel made its debut in the safety inspection application scenario in the coal gas area of steel enterprises, opening a new era of metallurgical safety inspections.

Valin previously disclosed its 2024 annual report, showing that in 2024, the steel industry continued to undergo profound adjustments, with the industry operating in a "three highs and three lows" situation of high production, high costs, high exports, low demand, low prices, and low profits. The industry faced a prominent supply-demand imbalance, with the price gap between supply and demand widening, and steel enterprises facing severe challenges. The company maintained its strategic focus, actively seized opportunities in the new round of technological revolution and industrial transformation, vigorously promoted cost reduction and efficiency enhancement initiatives, and accelerated the transformation and upgrading towards high-end, intelligent, green, and service-oriented development, maintaining relatively stable production and operation. In 2024, the company achieved a total operating revenue of 144.685 billion yuan, down 12.03% YoY; net profit attributable to shareholders was 2.032 billion yuan, down 59.99% YoY; net profit excluding non-recurring items was 1.306 billion yuan, down 72.10% YoY; and the net cash flow from operating activities was 5.778 billion yuan, up 9.58% YoY. During the reporting period, the company's basic earnings per share were 0.2941 yuan, and the weighted average return on net assets was 3.81%. The company's proposed distribution plan for 2024 is to distribute a cash dividend of 1 yuan (tax-inclusive) for every 10 shares to all shareholders.

Valin also introduced in its annual report its 2025 business plan: Based on situation analysis and industry benchmarking, combined with the decomposition of the company's "14th Five-Year Plan" strategic planning tasks, the company's key work for 2025 is as follows:

1. Focus on product upgrading and innovation-driven enhancement of core competitiveness. Adhere to the principles that science and technology are the primary productive forces, talent is the primary resource, and innovation is the primary driving force, continuously shaping new momentum for high-quality development. First, further leverage the role of industry-university-research technological innovation platforms. Strengthen the integration of industry, university, research, and application, gather internal and external intellectual resources, promote research on forward-looking, fundamental, and key common technologies in steel manufacturing, drive the quality improvement and upgrading of innovation platforms, strengthen intellectual property protection, and enhance patent quality. Second, we will further promote "high-end + differentiated" R&D innovation. We will deepen the construction of an integrated sales, R&D, and production system based on IPD, focusing on the needs of major equipment manufacturing, strategic emerging industries, etc., and accelerate the development of high-precision and cutting-edge products such as steel for ships and marine engineering, steel for low-temperature pressure vessels, high-grade electrical steel, and threaded joints for ultra-deep wells, as well as high-end specialized and special-purpose products. We will develop 10-15 high-precision and cutting-edge steel grades to replace imported ones and continuously increase the proportion of sales of key high-end steel varieties. Third, we will further strengthen the construction of technical and highly skilled talent teams. We will improve the talent management mechanism, increase the recruitment of high-level talents, innovate the talent cultivation and utilization model, improve the evaluation system for R&D talents, and optimize the talent growth channels. We will promote the spirit of craftsmanship and prepare for industry skill competitions.

2. Strengthen lean production and comprehensively improve production quality and efficiency. We will accelerate the implementation of digital and intelligent upgrades and iterations of production line equipment, promote stable and efficient production, and provide strong support for high-quality development with extreme cost reduction and extreme energy efficiency. First, we will use technological transformation projects as a driving force to promote first-class production quality and efficiency. We will accelerate the construction of projects such as the Valin Xianggang Steel Sheets & Plates Finishing and Surface Treatment Center, the third phase of the bar finishing line, the second phase of the first step of the Valin Liangang Electrical Steel Project, the cold-rolled high-end home appliance plate project of Valin Liangang, and the Valin Henggang Super Large-Diameter Continuous Rolling Pipe Project, and quickly achieve full production and efficiency, enhancing the capability of manufacturing high-quality products and promoting the continuous improvement of varieties, quality, and efficiency. Second, we will focus on digital and intelligent transformation to achieve a high level of intelligent manufacturing. Supported by a large steel model, we will accelerate the implementation of intelligent manufacturing projects, increase the promotion and application of scenarios, and drive the addition of more than 10 digital and intelligent application scenarios. We will systematically promote the construction of a digital system, strengthen data management and utilization, and further improve the digitalization rate. Third, we will use extreme benchmarking as a starting point to enhance the hard power of production line equipment. We will adhere to benchmarking against the best in history and the industry, focus on accurately addressing shortcomings and weaknesses, strengthen lean production and process management, achieve benchmarking energy efficiency in major processes, keep pig iron costs below the industry average, continuously optimize various technical and economic indicators, and strive for progress from backward to advanced and from advanced to even more advanced. We will continuously promote procurement cost reduction and supply assurance, continuously optimize the structure, expand resource channels, improve the construction of the centralised procurement information system, and enhance procurement quality and efficiency.

3. Highlight the strengthening of foundations to improve the level of safe production and green and low-carbon development. Safety and stability are the foundations of development, while green and low-carbon development are guarantees for sustainability. We will highlight the strengthening of foundations and build a safe and stable environment for high-quality development. First, we will focus on promoting continuous improvement in safe production. We will strictly implement the responsibility system for safe production, strengthen the awareness of safe production, and improve the level of intrinsic safety. Improve the construction of the information management platform for work safety, advance the dynamic clearance of major accident hazards, and achieve comprehensive upgrades in human, physical, and technological prevention. Focus on key areas and critical links, strengthen safety supervision over technological transformation construction, maintenance, and outsourced contractors, enhance the "blacklist" management of contractors, and maintain a stable and safe production environment. Second, accelerate the pace of green and low-carbon development. Concentrate financial and technical resources to push forward ultra-low emission transformation, complete project construction and public announcements on time with high quality, and ensure the economical and safe operation of environmental protection facilities. Resolutely and effectively advance environmental problem rectification to ensure the implementation and effectiveness of all corrective measures. Promote low-carbon development, accelerate research on low-carbon development pathways through the Green and Low-Carbon Research Center, strengthen carbon asset management, drive green product certification, and further enhance the effectiveness of green and low-carbon development.

4. Deepen reforms continuously to invigorate development momentum. Thoroughly implement the arrangements for state-owned enterprise reforms outlined at the Third Plenary Session of the 20th CPC Central Committee, persist in deepening reforms, and inject strong momentum into high-quality development. First, enhance corporate governance efficiency to create value. While maintaining good profitability and development prospects, continue to improve information disclosure and investor relations management. Implement the State Council’s "New Nine Guidelines" and the China Securities Regulatory Commission’s requirements on market value management, research and formulate plans to boost the market value of publicly listed firms, stimulate market vitality, and enhance investment value. In accordance with the new Company Law’s provisions on optimizing corporate governance structures, advance the reform of the board of supervisors, improve internal audit and supervision mechanisms, and ensure the effective execution of supervisory functions in publicly listed firms. Second, deepen institutional reforms to increase vitality. Strengthen the concept of reform serving production and operations, adhere to "hard constraints and strong incentives," "elimination of the bottom performers," and "classification and grading, tailored policies for each enterprise" in setting performance evaluation indicators, optimize the performance management system, and unleash the innovative potential of all employees. Continue to deepen the "three systems" reform to improve labor productivity.

Cinda Securities’ research report pointed out: As a steel giant in southern China, Valin boasts large capacity and high growth potential, with outstanding scale advantages. In recent years, the company has continuously advanced its high-end strategy, coupled with ongoing quality and efficiency improvements, resulting in strong competitiveness. Currently, the steel industry remains at the bottom of the cycle. Under the "stable growth" policy and supply-side adjustment expectations, the industry’s structure is expected to stabilize and improve. With the recovery of the economic cycle and the steel sector, Valin’s upward elasticity from the bottom is significant, offering strong investment value. "Large Scale" — Valin exhibits notable economies of scale. "High Growth" - Valin's scale continues to grow. "High-end Development" - The company actively promotes a high-end development strategy. "Strengthening Internal Capabilities" - The company continuously improves quality and efficiency. Cinda Securities believes that Valin is expected to fully benefit from the economies of scale brought by production growth and the improvement in profitability brought by high-end development. With the recovery of the steel sector, Valin's upward elasticity from the bottom is relatively significant. We are optimistic about the company's current improvement in operating performance and future development potential, and it has good investment potential at this stage. Risk factors: Major changes in the international situation; macroeconomic performance falling short of expectations; continued significant decline in the real estate market; major innovations in steel smelting technology; implementation of the company's management transformation falling short of expectations; major adjustments to the company's development plan.