The readings of this report are as follows:
The company achieved a net profit of 1.259 billion yuan in the first half of 2021, and the company's performance exceeded expectations. We believe that with the continuous optimization of the company's product structure, superimposed in the second half of the steel industry ushered in the peak season, the company's performance will be released steadily.
Main points of investment:
Maintain the "overweight" rating. In the first half of 2021, the company achieved operating income of 20.837 billion yuan, an increase of 42.46% over the same period last year, and a net profit of 1.259 billion yuan, an increase of 46.09% over the same period last year. Raise the company's eps forecast for 2021-22 to 1.20 eps 1.53 yuan (the original 0.82 pound 0.88 yuan), and increase the 2023 eps forecast to 1.67 yuan. With reference to similar companies, give the company 6 times the 2021 PE valuation, raise the company's target price to 7.20 yuan (the original 5.77 yuan), and maintain the "overweight" rating.
Steel sales continue to rise, and the product structure continues to improve. In the first half of 21, the company's crude steel output was 4.12 million tons, an increase of 5.8% over the same period last year. The company made efforts to improve production efficiency and smoothness, and its crude steel output maintained an upward trend. While the total amount has increased, the company has made great efforts to adjust the product structure. In the first half of the year, the market share of high-grade rebar in Guangdong has increased from 25% to 35%, and the national market share of LNG low-temperature steel products has achieved a breakthrough from zero to 30%. We believe that the company's lean production and optimization of product structure will continue to advance, and the company's profitability will increase steadily.
During this period, the cost continued to decline. The company continues to promote cost reduction, with three fees per ton of steel (including research and development) of 155 yuan per ton in the first half of the year, down 32 yuan per ton compared with 2020. Benefiting from the improvement in the company's debt situation, the company's financial expenses turned negative in the first half of the year. We believe that the improvement in corporate profits will continue to improve the company's debt, and expenses may gradually decline during the company period.
With the advent of the peak demand season, the profitability of the iron and steel industry may continue to rise. At present, the iron and steel industry is at the alternating node of the off-peak season. We believe that with the gradual improvement of the domestic epidemic situation and the industry gradually ushering in the "Golden Nine Silver Ten" demand peak season, steel demand is expected to continue to recover in the latter half of the year, superimposing the downward trend of supply.
Risk tip: real estate demand fell sharply and monetary policy tightened more than expected.
