Summary of events: on October 29, the company released the third quarter report of 2022: in the first three quarters of 2022, the company achieved revenue of 18.161 billion yuan, an increase of 13.6% over the same period last year; net profit of 1.086 billion yuan, down 49.3% from the same period last year; and 1.051 billion yuan of non-return net profit, a decrease of 49.5% over the same period last year. 2022Q3, the company achieved revenue of 4.854 billion yuan, a year-on-year decrease of 20.7%, a month-on-month decrease of 39.9%; a return-to-mother net profit of 159 million yuan, a decrease of 76% and a decrease of 58.7%; and a non-return net profit of 132 million yuan, a decrease of 80.1% and 65.2%.
Comments: the company's production and sales volume and gross profit margin have declined compared with the same period last year.
① volume: in the first three quarters of 2022, the production and sales of the steel industry declined slightly compared with the same period last year, while the extractive industry declined sharply. In the first three quarters of 2022, the company's production and sales of iron and steel products were 3.1668 million tons and 3.1601 million tons respectively, down 1.47% and 1.75% from the same period last year, while the production and sales of iron concentrate powder were 104900 tons and 55900 tons respectively, down 80.55% and 89.58% respectively from the same period last year. The rebar and excellent line produced by the company have high brand awareness and market share in Jiangsu Province. spring flat steel has maintained a high share in the automotive spring steel segment market for many years.
② price: the price of raw materials is high, and the gross profit margin fell in the third quarter of 2022 compared with the same period last year. In the first three quarters of 2022, the gross profit margin was 9.64%, a year-on-year decline in 11.62pct, mainly due to weak downstream demand, pressure on steel prices, the high operation of raw fuel prices, the decline in the main business caused by the reduction of the price gap between steel purchases and sales, and freight charges included in operating costs in the fourth quarter of 2021; quarterly gross profit margin of 2022Q3 was 5.58%, a month-on-month decline of 2.72pct and a year-on-year decline of 12.39pct.
Future core focus: fine management cost reduction, equity incentives lay the foundation for long-term development ① fine management cost reduction, enhance the ability to resist market risk. With fine management as the main line, the company has established a cost reduction and efficiency system covering all functional departments from procurement, production and sales to technology, equipment and operation, so as to ensure the company's outstanding cost competitiveness and effectively improve the company's operating performance. the company's sales profit margin, profit level of tons of steel, return on net assets and other indicators have remained in the first square of listed companies in the industry for many years.
② equity incentive plan lays the foundation for the long-term development of the company. In September 2022, the company issued an announcement on the A-share restricted stock incentive plan, which intends to grant a total of 215.59 million restricted shares to 1230 people, including directors, senior managers, core personnel and backbone personnel. The incentive plan is conducive to the formation of benefit-sharing and risk-sharing mechanism among shareholders, companies and employees, fully mobilize the enthusiasm of employees, and support the realization of the company's strategic goals and long-term sustainable development.
Investment suggestion: the company can reduce cost and increase efficiency through fine management and Putter combination route, and continue to improve profitability. we expect the company's 2022-24 net profit to be 14.79x20.82pm, with PE 9x, 6x and 6x corresponding to the closing price on November 03, maintaining the "recommended" rating.
Risk tips: steel prices fluctuate sharply, downstream demand is lower than expected, and raw material prices fluctuate sharply.
