Event: Heshan Iron and Steel Co., Ltd. released its mid-2021 report: the company's operating income was 75.031 billion yuan, an increase of 48.76% over the same period last year; the net profit belonging to shareholders of listed companies was 1.521 billion yuan, up 121.63% from the same period last year.
The net cash flow generated by operating activities was 8.515 billion yuan, an increase of 183.54% over the same period last year.
Comments:
Optimize the structure of high-end products and improve profitability. During the reporting period, the company's income from the iron and steel industry, chemical industry and other businesses was 72.25 billion yuan / 744 million yuan / 2.036 billion yuan respectively, accounting for 96.29% of the total operating income, 0.99% and 2.71% respectively. The operating income of sheet metal was 52.648 billion yuan, accounting for 70.17% of the operating income, an increase of 57.43% over the same period last year; the operating income of billet was 1.642 billion yuan, accounting for 2.19% of the operating income, an increase of 310.85% over the same period last year. The company's iron and steel products cover automobiles, oil, railways and other important fields, obtained the world automobile supplier quality management system certification, and entered the market of major engineering projects. The company leads the world in vanadium and titanium smelting and product technology, and has the world's first "sub-molten salt efficient vanadium extraction clean production line". The products are mainly used in aerospace, metallurgy and chemical industry, new energy and many other fields.
Pay attention to the progress of relocation compensation of Tangshan branch, the asset-liability ratio is expected to continue to decrease. The company has reached an agreement with the Tangshan municipal government that all urban production capacity in Tangshan will be shut down in September 2020. Tangshan Municipal Government follow-up compensation "retreat two into three": the company received 2.311 billion yuan in relocation compensation from Tangshan Municipal Government on August 17, 2021, and is expected to complete 2980 mu of land transfer and relocation payment of 22 billion yuan (including the first batch of relocation payments) by December 31, 2021; the remaining 2780 mu of land and 11.4 billion yuan of relocation compensation will be completed by June 30, 2022. The production capacity of Tangshan Branch is basically the same as that of Higang Leting Iron and Steel Co., Ltd., which was acquired by the company in April 2020, which can hedge most of the relocation impact. For a long time, the company's debt ratio has been more than 70%, and it is at a high level in the industry. after receiving the relocation compensation of the Tangshan municipal government, it will help to reduce the financial risk and improve the profitability.
Profit forecast: cover for the first time, give the company a "buy" rating, it is estimated that the company's 2021-2023 EPS is 0.33 yuan / 0.37 yuan / 0.42 yuan respectively, corresponding to PE is 8.45x/7.61x/6.74x.
Risk tips: demand falls short of expectations; relevant policy changes; performance forecasts and valuation judgments fall short of expectations
