2Q21 performance significantly exceeded market expectations
The company announced 1H21 results: revenue 56.864 billion yuan, year-on-year 51.92%; return to the mother net profit 4.644 billion yuan, year-on-year 471.65%, of which Q2 single-quarter return net profit was 3.133 billion yuan, 620.32% year-on-year, 107.36%. The company's performance is much higher than expected, and the volume and profit of steel products are on the rise. Comments:
1) Steel output hit an all-time high, and the rise in prices pushed the gross margin per ton of steel to continue to rise. The company's 2Q21 steel production and sales volume were 558 and 5.5 million tons respectively, up 15.3% and-0.9% respectively over the same period last year, and the output reached an all-time high. The company's 2Q21 steel price per ton, gross profit per ton steel, cost per ton steel and net profit per ton steel are respectively 5996, 1253, 453,570 yuan / ton, up 1248 yuan / ton, 670,215,269 yuan / ton respectively. Among them, the main products plate and strip, bar and wire rod and train wheel and axle ton steel prices are 56624944 yuan / ton, 11470 yuan / ton respectively, up 926,988,728 yuan / ton respectively. The rise in the price per ton steel promotes the company's gross profit to rise sharply. 2) the rate of R & D expenditure has increased significantly. The company's 2Q21 R & D expenditure rate is 4.5%, an increase of 2.5ppt over the same period last year, mainly due to the company's efforts to strengthen scientific research. 3) accounts receivable and inventory turnover continued to increase. The company's 1H21 accounts receivable and inventory turnover were 49.36,3.89 respectively, up 15.82,0.69 times compared with the same period last year, and the company's operation and management ability improved steadily. 4) High dividend is expected. The company's dividend ratio remained at a high of 50.49% in 2020, such as the 21-year dividend ratio was the same as the same period last year, and the corresponding 21e dividend yield was 10.7%.
Development trend
Steel production restrictions continue, and the company is expected to make a profit in the second half of the year. Recently, the reduction of steel production has progressed steadily. 62% of iron ore prices have fallen to around US $150. steel prices are stronger than ore prices. we simulate that the gross margin of hot rolled tons, regardless of raw material inventory, has rebounded to around 1000 yuan / ton. We believe that as the steel demand gradually enters the peak season, the industry supply and demand is expected to continue to improve, and the company's profit in the second half of the year is expected to rise further.
Product structure optimization + management efficiency continues to improve, optimistic about the company's medium-and long-term development. We have observed that the company has stepped up research and development and continued to develop new products, with a cumulative development of more than 680000 tons of new products in the first half of the year, the best level in history. Among them, H-section steel for steel structure, wind power steel and high-row silicon steel products are all kinds of steel with excellent profitability; on the other hand, after joining Baowu, the company's operation and management ability continues to improve, and its steel output, inventory and receivables turnover are all at the best level in history.
Profit forecast and valuation
Due to the assumption of increasing the selling price of the company's steel products, we increase 2021 Universe 22eEEPS47.3% to 1.23 Universe 1.25 yuan. The current stock price corresponds to A shares 2021 / 22 P/E4.7 × / 4.6x, H shares 2021 / 2022 P/E2.9x/2.9x. We maintain the neutral rating of the company's A / H shares, and taking into account the company's earnings and current valuation levels, we raise the target price of A / H by 46.6% to 6.89 yuan and HK $5.0 respectively (corresponding to A shares 2021 / 22 P/E5.6 × / 5.5x, H shares 2021 / 2022 P/E3.5x/3.4x), A / H shares have 19.2% and 19.3% upward space, respectively.
Risk
The macro economy fell sharply; liquidity contracted more than expected.