21H1's net profit increased by 1741% compared with the same period last year, maintaining the "overweight" rating. On August 27, the company released a semi-annual report with 21H1 revenue of 14.66 billion yuan (yoy+50%) and home net profit of 1.27 billion yuan (yoy+1741%), which was consistent with the 1.27 billion yuan of performance forecast (2021-023). 21Q2 revenue of 8.43 billion yuan (yoy+23%, qoq+35%), home net profit of 1.08 billion yuan (yoy+315%, qoq+458%). The company continues to promote the optimization of product structure, and there is room for further cost reduction and efficiency under Baowu Group, we are optimistic about the development of the company. Considering the impact of the steel production restriction policy, we reduce production and raise the steel price assumption. It is estimated that the company's EPS in 21-23 is 1.51 PE 1.59max 1.70 yuan (previous value 0.35 pound 0.37 pound 0.48 yuan), comparable company PE (2021E Force consensus expectation) is 5.01 times, considering the company's leading position in Xinjiang region and Baowu Group's reduction of this efficiency expectation, give the company 5.8 times PE (2021E) The target price is 8.76 yuan (the previous value is 5.59 yuan), maintaining the "overweight" rating.
Optimize the product structure, adhere to the standard to find the difference, gross profit margin year-on-year + 10.6pct according to the company's semi-annual report, 21H1 company steel output of 3.46 million tons (yoy+31%), of which building materials and plates are 136,1.83 million tons (yoy+19.6%, + 16.5%). According to the company's business announcement (2021-033), the average price of 21H1 building materials and plates is 4216 yuan and 4288 yuan per ton (yoy+26.2%, + 23.5%).
21H1 company gross profit margin 18.4% (yoy+10.6pct), in the context of the economic recovery of steel prices, the company stepped up product structure adjustment, adhere to the standard to find the difference, the profit level increased significantly. The company's expenditure rate during the period is 7.6% (yoy+0.8pct), of which 1.7% is for R & D (yoy+1.7pct), mainly due to the company's increased investment in new technology research and development. Net interest rate on sales is 8.7% (yoy+8.0pct).
Crude steel production is limited in the second half of the year, and tons of steel are profitable or improved.
At the beginning of the 21st century, the Ministry of Industry and Information Technology and the National Development and Reform Commission put forward the requirement that the steel output in 2021 would not increase compared with the same period last year, the 21H1 market continued to ferment, the steel price continued to rise, and because there was no actual production restriction policy, the mineral price rose sharply at the same time. In the second half of the year, as the production restriction policy is gradually implemented at the local level, steel prices may remain high, but iron ore demand begins to fall substantially, ore prices begin to fall, and the company's profits per ton of steel may be improved. In terms of production, 21H1 produced 3.46 million tons of steel, 55% of the output in 2020, and the output in the second half of the year may be affected. Generally speaking, the impact of production restriction policy on the company's performance in the second half of the year may be uncertain.
Continue to promote the optimization of product structure and find the difference, maintain the "holding" rating company is the only iron and steel listed company in Xinjiang, continue to promote the "plate-shaped excellent" product structure adjustment and optimization strategy to improve the core competitiveness of enterprises. In addition, the company under the banner of Baowu, China, to carry out the coordination of raw material procurement section, there is room for further cost reduction and efficiency, we are optimistic about the development of the company. Considering the impact of the steel production restriction policy, we reduce the output and raise the steel price hypothesis. It is estimated that the company's EPS for 21-23 years will be 1.51 PE 1.59, which is 5.01 times as much as that of the comparable company PE (2021E). Considering the company's leading position in Xinjiang and its subordinate Baowu Group's reduction of this efficiency expectation, it will give the company 5.8x PE (2021E) with a target price of 8.76yuan, maintaining the "overweight" rating.
Risk hint: macroeconomic growth is lower than expected; iron ore prices rose faster than expected.