The readings of this report are as follows:
The company's first-half results are in line with expectations; due to production restrictions in the third quarter, its performance may decline month-on-month. After the completion of the capital increase and control of Guangxi Iron and Steel, the company has achieved a simultaneous rise in volume and price, the product structure has been continuously optimized, and the company's performance is expected to grow steadily.
Main points of investment:
Maintain the "overweight" rating. In the first three quarters of 2021, the company achieved revenue of 65.108 billion yuan, an increase of 75.14% over the same period last year, and a net profit of 2.303 billion yuan, an increase of 85.64% over the same period last year.
Considering that the company has realized production capacity expansion after increasing capital to control Guangxi Iron and Steel, and the product structure has been continuously optimized, the company's EPS in 2021-2022 has been raised to 1.24max 1.28 yuan (the original 0.71 pound 0.73 yuan), and the new EPS in 2023 is predicted to be 1.30 yuan. Refer to similar companies to give the company a valuation of PE6 times in 2021, raising the target price to 7.44 yuan (formerly 5.68 yuan) and maintaining the "overweight" rating.
In the first half of the year, both volume and price rose, and the product structure was further enriched. At the end of the 20th, the company completed the capital increase and holding of Guangxi Iron and Steel, and in the first half of 21, the company achieved a simultaneous rise in volume and price, and its profitability increased significantly.
As a result of holding Guangxi Iron and Steel Co., Ltd., the new hot-rolled and cold-rolled steel strip production was 46.6 and 877000 tons respectively, and its total steel output reached 6.222 million tons, an increase of 50.2% over the same period last year. The average steel selling price of the company rose 36% compared with the same period last year. 21H1's net profit rate on sales was 6.64%, up 3.28% from a year earlier.
The research and development of new products has been continuously strengthened, and the product structure has been continuously optimized. 2021H1 invested 1.51 billion yuan in science and technology research and development, up 204 percent from the same period last year, and 103.16 percent per ton of steel research and development compared with the same period last year. The proportion of the company's steel varieties reached 63.2 percent, up 1.3 percentage points, and the efficiency of steel varieties reached 364 million yuan.
Adhere to green development and constantly strengthen energy management. The comprehensive energy consumption of 505.8kg standard coal per ton of steel of 2021H1 Company is the best in history, which is lower than that of 34.8kg standard coal compared with the same period last year; waste heat and residual energy power generation accounts for 79.61% of the total power supply, ranking the leading level in the industry; and the comprehensive energy consumption of 563.4kg standard coal per ton of iron and steel in Guangxi is declining month by month, and its self-generating rate is as high as 83.23%. We believe that in the context of carbon neutralization, the company's green development model is conducive to further enhance the competitiveness of the company.
Risk hint: downstream demand fell more than expected, production restrictions tightened more than expected.