XINYI GLASS [0868.HK; HK$8.08; BUY] - Xinyi Glass (XYG) reported 1H 2017 results whichwere lower than our expectations. The positives from float glass and Xinyi Solar (XYS)[0968.HK] were offset by the lower-than-expected performance of the automobile and constructionglass segments. Despite weak solar glass prices, XYS was not a drag on XYG’s bottom-linegrowth in 1H 2017. XYS’s 1H 2017 results show that it continued to deliver despite a challengingenvironment. XYS management is confident about the outlook in 2H 2017, which implies thatXYS shouldn’t be a drag on XYG in 2H 2017. We maintain the view that XYG will be one of themajor beneficiaries of supply-side reform in China. XYG’s share price may come under pressure,given its lower-than-expected 1H 2017 results, which in our view, offers a good buyingopportunity for investors. Despite a mild downward earnings adjustment, XYG is now trading ata 9.0x 2017 PER and an estimated yield of 5.5%. We maintain our BUY call, with a target priceof HK$10.13 (based on an 11x 2017E PER, lower than its historical average and the average ofits listed peers).    XIWANG SPECIAL STEEL [1266.HK; HK$1.38; NOT RATED] - Xiwang Special Steel hasreleased a positive profit alert for 1H17, indicating that it expects net profit to reach ~RMB300m.    In 2H17, management believes that profitability should be at least in line with the level in 1H17,implying full year net profit of RMB600m. With a 4x 2017E PER and 0.6x PBR, it is trading at a61% and 43% discount to its major peers in terms of PER and PBR, respectively. We see twomajor catalysts to narrow the valuation gap: (i) steel prices should remain resilient during thepeak season in September and October; and (ii) a final resolution of the bankruptcy of QixingGroup should help remove the overhang for its parent company.

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