This report is read as follows:
The company ploughs the main iron and steel industry, constantly improves its competitiveness and taps its own potential. The company has allocated 10 million tons of new production capacity in Fangchenggang, and the company's performance will be gradually released with the production capacity in the future.
Summary:
Maintain the "overweight" rating. We maintain the company's forecast of 0.73 EPS of 0.83 yuan for 2021-2022, and the EPS of the new company for 2023 is 0.84 yuan. With reference to similar companies, the company is given a 21-year 4-fold PE valuation, corresponding to a share value of HK $3.56, with an "overweight" rating.
Deeply ploughing the main steel industry, the company's own strength continues to improve. The company continues to cultivate its own main steel industry, starting the upgrading of blast furnace and converter equipment in 2019, the new equipment will be completed in 2020, and the company's production capacity and production line will be more perfect. In addition, the company continues to tap its own potential, and the gross profit per ton of steel is maintained at a good level. In the first half of 2019-2021, the gross margin per ton of steel is 428,247,460 yuan per ton respectively, and the net profit per ton of steel is 360,194,342 yuan per ton. The cost control level of the company is excellent, and the cost per ton of steel (excluding R & D) is 91, 90 and 96 yuan per ton from 2018 to 2020, maintaining a low level. We believe that the smooth operation of the new equipment will improve the operating efficiency of the company, and the company's profitability will be steadily improved.
Fangchenggang base may gradually fall to the ground, the company's growth space will be opened. In 2019, the company made a plan to build a new 10 million-ton steel sheet pile project in Fangchenggang area, of which the first phase is planned to put into production of 6.5 million tons with an investment of 22 billion yuan. At present, the company has completed the purchase of 3.05 million tons of crude steel capacity target, the first phase of the project still needs energy consumption approval to start construction, the follow-up company will continue to purchase capacity targets to ensure the implementation of the plan. The company's current crude steel production capacity is 10 million tons. With the gradual landing of the company's new production capacity, the company's production capacity will double, and the company has broad room for growth in the future.
The profitability of the steel industry in 2022 may be higher than that in 2021. Under the background of carbon neutralization, the output of crude steel in China will be strictly controlled, the cost of the iron and steel industry will continue to decline, and the profit center of the industry may exceed 2021 in 2022. In the long run, the carbon neutralization policy confirms the end of the production cycle of the iron and steel industry, the demand of the steel industry continues to rise in the context of the rising urbanization rate, and the new prosperity of the industry begins.
Risk hint: the company's new production capacity falls short of expectations; monetary policy tightens beyond expectations.