Anshan Iron and Steel Co., Ltd. is a holding subsidiary of Angang Group, mainly engaged in the production and sales of iron and steel products, supporting a relatively complete logistics, trade, steel processing service industry chain. The company has Anshan, Yingkou, Chaoyang three major production bases.

Raw material costs fall, looking forward to profit space repair: since entering the fourth quarter, due to insufficient market demand, steel prices fluctuated downward, insufficient capacity utilization. In November, the country produced 69.31 million tons of crude steel, down 22 percent from the same period last year. Prices of rebar and hot-rolled versions are down more than 20 per cent from their September highs in mid-December. With the high price of iron ore and coke at the early cost end, iron and steel enterprises take the initiative to reduce production under the condition of production loss. However, recently, with the weakening of cost pressure, the profit space of iron and steel enterprises has been repaired, and it is expected that after the relevant policies of production restrictions in the heating season are loosened, with the gradual repair of downstream demand, production capacity will be restored and the industry will gradually pick up. As a leading enterprise will benefit first.

Resource advantage guarantee company performance: Angang Group has 8.8 billion tons of iron ore resources, the annual mining and stripping capacity and mineral processing capacity are ranked first in China. In the first three quarters, driven by the increase in volume and price, the company's revenue was 108.537 billion yuan, an increase of 52.50%, and a net profit of 7.489 billion yuan, an increase of 465.21%. The advantage of resources ensures the stable growth of the company's long-term performance, and with the recovery of sales, profit flexibility will be released.

Layout of clean energy industry chain to improve profitability: the company set up a joint venture with CIMC Enrico to launch the coke oven gas to liquefied natural gas (LNG) co-production project. Angang Energy Technology, a subsidiary, has rich advantages in coke oven gas resources, while CIMC Anreko has rich experience and technical advantages in LNG and hydrogen energy industry. As a major coke producer, China has about 1800 billion square meters of coke oven gas resources per year. Among them, the amount of capital used to make LNG is less than 10%, which has great potential for development. At the same time, iron and steel enterprises are also gas users, through the deep processing and separation of coke oven gas to form a variety of clean energy products to achieve energy saving and emission reduction while reducing costs. The project is expected to start production in the third quarter of 2022 at the earliest, with an annual production capacity of 125000 tons of LNG and 24 million cubic meters of hydrogen. In the future, it may be possible to reduce fuel costs and increase the company's revenue level.

Investment advice: the industry leader has the advantage of resources and cost control, and is expected to benefit from the upturn downstream. The current valuation of the company is in the bottom range, it is recommended to buy.