Stable production, record profit, and performance in line with expectations
In the first half of 2021, the company seized the opportunity of the industry, stable production and substantial growth in performance. In the first half of the year, the company produced 2.06 million tons of steel, down 4.1% from the same period last year; operating income reached 9.87 billion yuan, up 34.1% from the same period last year; and net profit belonging to shareholders of listed companies was 1.48 billion yuan, up 79.8% from the same period last year. Of this total, the operating income in the second quarter was 5.83 billion yuan, up 44.2 percent from the previous quarter; and the net profit belonging to shareholders of listed companies was 920 million yuan, up 67.2 percent from the previous quarter. The performance is in line with expectations.
Iron fine powder business thickens the company's profits
In the first half of 2021, the company produced 340000 tons of fine iron powder, an increase of 23.6% over the same period last year. Benefiting from the rise in the price of iron concentrate powder and the decline in production costs, the corresponding operating income was 410 million yuan, an increase of 211% over the same period last year, a gross profit of 340 million yuan, an increase of 267% over the same period last year, and a further increase in gross profit margin to 83.7%.
Profit redistribution of industrial chain under the background of flat control of crude steel output
With the orderly development of steel production capacity "looking back" work in various regions, the management and control policy for crude steel output is becoming increasingly clear. The output of crude steel is controlled, which is good for the relationship between supply and demand at the steel end, empty at the stone end of iron ore, and conducive to the redistribution of the profits of the industrial chain. With the fall in iron ore prices, steel mills are expected to maintain profits at an ideal level.
Risk hint
The demand side showed a more-than-expected decline. The flat control policy of crude steel production is not as strong as expected.
Investment advice: maintain the "overweight" rating
The company has high asset efficiency and strong profitability, which has formed a characteristic development route of Putter combination. Considering that the profitability of the industry is expected to continue to improve in the context of carbon neutralization, we have raised our performance forecast.
It is estimated that the company's operating income in 2021-2023 is 211,000,000 yuan (171174pm), a year-on-year growth rate of 26.8cm, 1.1%, and a homing net profit of 30.3pm, 329,000,000 yuan (the original forecast was 25.3pm, 2.71b, 2.89 billion yuan), a year-on-year growth rate of 41.7 per cent, 5.3 per cent, and 3.09 billion yuan, respectively, with a year-on-year growth rate of 11.8 billion yuan and 31.9 billion yuan, respectively. The diluted EPS is 1.4Compact 1.5x1.5, while the current share price corresponds to PE 5.6Compact 5.3Univer 5.2x, maintaining the "overweight" rating.