Event: the company issued a forecast of third-quarter results, and estimated that the net profit in the first three quarters was 3.303 billion yuan, an increase of 67.32% over the same period last year. The net profit in the third quarter was 574 million yuan, down 28.16% from the same period last year, and 68.20% lower than in April-June.
If the company's annual output does not increase, crude steel output in the second half of the year will fall 14.48% month-on-month from January to August 2021. Fujian Province's crude steel output totaled 17.72 million tons, an increase of 8.3% over the same period last year, of which the average daily crude steel output from April to June was 85200 tons, and that from July to August was 66400 tons, down 22.03% from April to June. The crude steel output of Minguang in 2020 is 11.37 million tons, accounting for 46.1% of the crude steel output in Fujian Province. assuming that the company's crude steel output this year is the same as that of last year, the crude steel output in the second half of the year is expected to be 5.2419 million tons, down 7.02% from the same period last year and 14.48% from the previous year.
Steel prices fell in the third quarter, and the gross margin of the company's steel products is expected to decline: the company's products are mainly rebar, and the cost is at a high level in the third quarter due to raw material reserves and other reasons, and the overall product gross profit margin is expected to fall. Taking the gross margin per ton of rebar steel (cost lag 30 days) in Fuzhou as an example, the average gross margin per ton of rebar from July to September in 2021 was 758 yuan, which decreased by 17.23% compared with the second quarter.
The company will increase capital in Shoushan Chemical to further stabilize the upstream coke and coal supply chain: in July 2021, the company plans to participate in the capital increase of Shoushan Chemical Industry with 22.7397 million yuan in dividends received by Shoushan Chemical Co., Ltd., and the company's shareholding proportion in Shoushan Chemical will remain unchanged at 6.87%. In recent years, through strategic participation in Shoushan Chemical Company, Minguang of Sangang has established and maintained a long-term and stable supply chain relationship between coke and coal with Zhongping Chemical Group, the controlling shareholder of Shoushan Chemical Company, and its ownership enterprises. participation in this capital increase will help to continue to consolidate the strategic partnership with upstream coke and coal fuel suppliers. The capital increase will help stabilize the company's coke and coal supply chain.
In the fourth quarter, the company is expected to further benefit from the expected contraction of long wood supply: from January to July 2021, the increase in output of non-key steel enterprises (12.49%) is greater than that of key steel enterprises (8.69%). This also means that non-key steel companies that mainly produce construction steel are under greater pressure to reduce production from August to December, and the recent production restrictions in Jiangsu have become stricter, and the output of long products in the region accounts for a relatively high proportion. It is expected that the subsequent contraction of construction steel supply will be intensified. As a leading enterprise of long wood, the company is expected to benefit greatly from the repair of long wood prices and profits in the fourth quarter. As of October 8, the price difference between hot coil and threaded ton steel in Shanghai has been reduced from positive to negative to-130 yuan per ton, and the profit per ton of screw thread has reached 1173 yuan, which has reached the highest level since 2019, and the profit per ton of hot coil steel is only 827 yuan.
Profit forecast, valuation and rating: as a leading company of long wood, Minguang of Sangang will benefit greatly from the improvement of long wood price and profit in the fourth quarter, and its profitability is expected to be further improved. We maintain the profit forecast for the company from 2021 to 2023. It is estimated that the return net profit of the company from 2021 to 2023 is 46.81,49.29 and 5.038 billion yuan respectively, corresponding to the EPS of 1.91,2.01,2.06 yuan respectively, maintaining the company's "overweight" rating.
Risk hint: the expected reduction of crude steel production in Fujian Province is stricter; the downstream demand for construction steel falls sharply.