Incident: The company released its annual performance forecast for 2022, achieving net profit of -893 million yuan for the whole year, moving from profit to loss over the previous year, achieving net profit of -1,176 million yuan after deduction, a year-on-year change from profit to loss; it is expected that Q4 will achieve net profit of -1,557 billion yuan, with losses increasing 104.09% month-on-month, and losses increasing 30.37% year-on-year.
In 2022, the company strictly implemented environmental production limits. Crude steel production was about -4.77% year-on-year: in 2021, the company's crude steel production was 20.97 million tons; in 2022, the company strictly implemented environmental production limits. Crude steel production was limited to 1 million tons. Expected crude steel production was 1997 million tons, -4.77% year on year; in 2021, the company's pig iron production was 18.23 million tons. In 2022, the company's subsidiary Changjiang Steel's No. 2 and 3 blast furnace overhauls affected symbiotic iron production. Approximately 630,000 tons.
The company's non-recurring profit and loss in 2022 mainly comes from investment income obtained from disposal of subsidiary shares: in 2022, the company's non-recurring profit and loss attributable to shareholders of listed companies was about RMB 283 million, mainly due to the comprehensive impact of the company's profit and loss from disposal of non-current assets, investment income obtained from disposal of subsidiary shares, government subsidies received, and compensation for the termination of labor contracts by consensus.
Dispose of the shares of a number of subsidiaries, focusing on the development of the main steel business: in 2022, the company issued announcements to deal with the non-steel industry. It plans to reduce the capital of Ma Steel Chemical Company's shares (the shareholding ratio dropped from 45% to 32%), transfer shares of Ouye Metallurgical Chain Gold Renewable Resources Co., Ltd. (9.88%), transfer of shares of Huabao Duding (Shanghai) Financial Leasing Co., Ltd. (3.11%), transfer of shares of Ma Gang (Jinhua) Steel Processing Co., Ltd. (75%), transfer of shares of Anhui Ma Steel and Ling Industrial Co., Ltd. (71%), transfer of assets related to the business of Lime Company, and transfer of assets related to the lime company's business Metallurgical Commercial Factoring Limited The responsible company's equity (16.14%) better supports the construction of the company's main steel business.
Ma Steel Joint Stock Company, a wholly-owned subsidiary of the company, plans to carry out mixed ownership reform through a public listing on the Shanghai Stock Exchange. Ma Steel Communications, a wholly-owned subsidiary of the company, has been focusing on the field of new materials for rail transit axles for a long time and is committed to becoming the most competitive rail transit axle manufacturing service provider in the world. In March 2023, the company issued an announcement stating that its subsidiary Baowu Group Ma Steel Rail Transit Material Technology Co., Ltd. plans to introduce strategic investors and implement employee equity incentives through a public listing on the Shanghai Joint Property Exchange to carry out mixed ownership reform. After the planned mixed reform is completed, the company holds no less than 70% of Ma Steel's shares, the shareholding ratio of strategic investors does not exceed 25%, and the shareholding ratio of employees does not exceed 5%.
Profit forecast, valuation and rating: The profitability of the steel industry declined sharply in 2022, and we lowered the company's 2022 profit forecast to -883 million yuan. Since the company subsequently focused on the development of the main steel business and the gradual optimization of the product structure, we maintained the company's 2023-2024 net profit forecasts of 52.02 billion yuan and 5.365 billion yuan. The corresponding EPS was 0.67 and 0.69 yuan respectively, maintaining the “increase” rating for A/H shares.
Risk warning: The recovery in demand for real estate and infrastructure fell short of expectations; raw material prices have risen sharply.