21H1's net profit increased by 105% compared with the same period last year, maintaining the "overweight" rating. On August 20, the company released a semi-annual report with 21H1 revenue of 936 million yuan (yoy+54%) and home net profit of 257 million yuan (yoy+105%), which was in line with the 220 million-280 million yuan of the performance forecast (2021-049). 21Q2 revenue of 505 million yuan (yoy+42%, qoq+17%), home net profit of 160 million yuan (yoy+69%, qoq+65%). In the first half of the year, the company's performance benefited from the rise in iron ore prices, and in the second half of the year, under the influence of steel production restrictions, iron ore demand may decline substantially, ore prices may fall, and the company's 21H2 performance may be under pressure. We estimate that the company's EPS for 21-23 years is 0.83 prime 0.89 plus 0.96 yuan (the previous value is 0.93 plus 1.24 plus 1.32 yuan). The average PE (2021E) of the comparable company is 12.77 times, and the company is given 12.8x PE (2021E), corresponding to the target price of 10.61yuan (the previous value is 8.87yuan), maintaining the "overweight" rating.
The price of iron concentrate rose sharply, and the revenue of ferrous metal business increased by 56% compared with the same period last year. According to the company's semi-annual report, 21H1 sold 550000 tons of iron powder (yoy-10%), with an average price of 1289 yuan per ton (yoy+65%), achieving revenue of 710 million yuan (yoy+48%). The price rose sharply, offsetting the decline in sales. Sales of pellets 130000 tons (yoy+105%), the average price of 1101 yuan / ton (yoy+2%), achieving revenue of 140 million yuan (yoy+110%), sales boosted revenue to achieve greater growth. In terms of gross profit margin, the gross profit margin of iron concentrate powder is 44.36% (yoy+3.78pct) and that of pellets is 20.80% (yoy+0.35pct). Taken together, 21H1's ferrous metal business revenue increased by 56% compared with the same period last year, with a gross profit margin of 42.04% (yoy+2.93pct), achieving good growth.
Affected by the steel production restriction policy, the 21H2 iron ore price trend may be weak. At the beginning of the 21st year, the Ministry of Industry and Information Technology and the National Development and Reform Commission proposed that steel production should not increase in 2021 compared with the same period last year. 21H1 market continued to ferment, steel prices continued to rise, and as there was no actual production restriction policy, mining prices rose sharply synchronously. The high point of 21H1 Platts Index reached US $233USD / ton, up 46% from the beginning of the year, and then began to decline under policy regulation. Later, with the gradual implementation of the production restriction policy at the local level, iron ore demand began to show a substantial decline, and ore prices began to fall. In the latest period (8.19), the Platts index was 130 US dollars / ton, down 44% from the year's high. We believe that it is possible to strictly enforce steel production restrictions during the year, and the trend of 21H2 iron ore prices may be weak. Looking forward to the year 22-23, as the supply increment of the four major mines is still limited, it is expected that the mineral price will still be supported relatively.
Iron ore prices fall but still have support, maintain the "overweight" rating we believe that the year is more likely to strictly implement steel production restrictions, iron ore demand in the second half of the year may be substantial decline, ore prices may fall, the company's 21H2 performance or under pressure. However, looking forward to the year 22-23, as the supply increment of the four major mines is still limited, we expect that the mineral price will still be supported relatively. Under the assumption of upward adjustment of iron concentrate and pellet prices, it is estimated that the company's EPS for 21-23 years will be 0.83 + 0.89 + 0.96 yuan, and the comparable company's average value of PE (2021E) will be 12.77 times. The company will be given 12.8 times PE (2021E), corresponding to the target price of 10.61 yuan, and the "overweight" rating will be maintained.
Risk hint: the macro economy is not as good as expected, and the increase in iron ore supply is higher than expected.