Main points of investment:
Maintain the "overweight" rating. In the first three quarters of 2021, the company achieved revenue of 48.66 billion yuan, an increase of 38.3% over the same period last year, and a net profit of 3.36 billion yuan, an increase of 70.1% over the same period last year. Considering that the company's Q4 output may be affected by the production restriction policy, the EPS for 21-23 years will be reduced to 1.68pm 1.74pm 1.78 yuan (the original 1.74pm 1.80pm 1.84 yuan). With reference to similar companies, give it a valuation of PE6 times in 2021, lower the company's target price to 10.08 yuan (original 13.92 yuan), and maintain the "overweight" rating.
Profitability has improved significantly, and Q4 performance should continue to pay attention to the impact of production restriction policies. In the first three quarters of 2021, the company's net sales interest rate was 6.93%, up 1.31 percentage points from the same period last year, and the company's profitability increased significantly. In 2021, Q3 produced 2.787 million tons of crude steel in a single season, with a cumulative crude steel output of 8.916 million tons in the first three quarters. According to the 21-year crude steel production policy of no more than 20 years, we expect the company's Q4 crude steel output in a single season to be no more than 2.455 million tons, a decrease of at least 332000 tons compared with the previous quarter. We believe that for the company's fourth quarter results, we should continue to pay attention to the impact of the production restriction policy.
During this period, costs continue to improve, and profitability is expected to further improve. According to the company announcement, the company expense rate for the first three quarters of 2021 was 1.48%, down 0.4% from the same period last year and 0.08% lower than 2021H1; of which the management expense rate was 0.95%, down 0.3% from the same period last year. We believe that as the company's cost control capacity continues to improve, its profitability is expected to be further enhanced.
Regional leaders are expected to benefit from the new cycle of industry development. Under the background of carbon neutralization, the growth logic of iron and steel industry or company has changed from capacity expansion mode to individual endogenous growth mode of "fine management and cost reduction". We believe that the company, as the leader of steel enterprises in Fujian, still has the potential to further reduce costs and improve efficiency, the company's profitability is expected to continue to improve, performance may continue to grow.
Risk hint: downstream demand fell more than expected, production restrictions tightened more than expected.