Investment suggestion
Maanshan Iron and Steel Co., Ltd., raised the rating of ABank H shares from "neutral" to "outperform industry", and raised the target price of A shares from 5.2 yuan to 6.0 yuan, keeping the target price of Hong Kong stocks unchanged.
The reasons are as follows:
The signal of "steady growth" is further strengthened, and the recovery of downstream steel demand is expected. The signal of steady growth in the government work report has been further strengthened, and against the background of housing speculation, we believe that this round of infrastructure for stable growth is expected to be strongly supported. At present, we have observed obvious positive changes in infrastructure, from capital to projects, which are expected to boost the demand for construction steel, while the supply is inflexible. We are optimistic that the demand for 2Q steel will gradually recover, promoting steel prices and plate profits to rise steadily, and the plate is expected to usher in a valuation repair market.
Long board balanced regional iron and steel leader in East China, location advantage is expected to bring the company high profit flexibility. The proportion of the company's long wood plate is 52% and 47% respectively, and the main iron and steel production capacity depends on the Yangtze River Delta region with developed manufacturing and strong steel demand, which can enjoy the steel price premium brought by the good supply and demand pattern in the region. We have observed that there are obvious signs of infrastructure strength in the Yangtze River Delta, and regional demand is expected to take the lead to pick up and promote steel prices and profits to rise further. 1Q up to now, the profits of thread / hot rolling (considering one-month iron ore inventory) simulated by us are 675pm 523 yuan respectively, which is 274pm 428 yuan higher than the previous month. We are optimistic that the rebound in demand will bring high profitability to the company.
Equity incentives demonstrate confidence in development, and low valuations and high dividends build a margin of safety. We have observed that after the company joined Baowu, the operation and management continued to improve, the expense rate continued to decline while the production efficiency increased. In addition, the company issued the equity incentive plan on December 25, 21. We believe that the company's incentive mechanism is deepening the reform, showing confidence in development, and is expected to mobilize the enthusiasm of the core backbone. It is optimistic that the company's medium-and long-term profitability will improve steadily with the improvement of business efficiency. At the same time, the company has a dividend rate of more than 50% for the 19-20 years, and we expect the company to have a high margin of safety with a dividend of HK $0.35 / HK $0.43 for 21 years (corresponding to the current dividend rate of 7.59 scarp 13.97%).
What is the biggest difference between us and the market? We believe that steel demand may exceed market expectations in the context of steady growth.
Potential catalyst: the steady growth policy has gradually landed; the downstream demand for steel has rebounded significantly.
Profit forecast and valuation
Due to the decline in 4Q21 steel prices, the industry profit phase shrank, considering the decline in the company's performance announcement, we lowered the company's 21-year EPS43.9% to 0.69 yuan. We are optimistic that the rebound in demand will bring high profitability to the company, maintain EPS0.98 yuan unchanged for 22 years, and introduce 23eEPS0.86 yuan. The company's current stock price of 22/23e4.7 H shares corresponds to that of 2.7x/3.1xP/E 5.3x and 2.7x/3.1xP/E. In the context of steady growth, we are optimistic about the company's earnings expansion and achieve valuation repair, upgrade the company's Ahammer H stock rating to outperform industry, raise the A share price from 15.4% to 6.00 yuan, and keep the H share price unchanged at HK $4.000.There is 30% upside space for A / H share 22e/23e6.1x/6.9x and 3.5xpear 3.9xP hand H shares respectively.
Risk
The pressure of raw material cost is higher than expected; the real estate boom is falling more than expected.