Event: Shougang released its annual report for 2022, and the company's annual operating income was 118.142 billion yuan, down 11.16% from the same period last year; the net profit belonging to shareholders of listed companies was 1.125 billion yuan, down 84.18% from the same period last year.

Zhixin electromagnetic is the world's leading manufacturer and service provider of electrical steel. The company produced 1.485 million tons of electrical steel in 2022, 1% lower than the same period last year. High-end electrical steel products accounted for 63%, an increase of 15% over the same period last year. The output of 0.20mm and below ultra-thin specification high magnetic induction oriented electrical steel products reached 70,000 tons, an increase of about 30% over the same period last year, and achieved the first domestic sales for five consecutive years. The output of high-grade non-oriented electrical steel was 728000 tons, an increase of 33% over the same period last year. Among them, the output of high-grade non-oriented electrical steel products for new energy vehicles increased by 144% over the same period last year, and seven of the top 10 car companies in global sales of new energy vehicles were in stable supply. All the top 10 car companies in China have achieved stable supply.

The output of the company's automobile plate has increased steadily, and the product structure has been continuously optimized. In 2022, the company's automobile plate output was 3.61 million tons, an increase of 1.69% over the same period last year. The output of galvanized, high-strength and outer plates increased by 5%, 23% and 7% respectively compared with the same period last year; ultra-high-strength and aluminized silicon products increased by 80% and 54% respectively compared with the same period last year. At present, the company has 10 car plate production lines, with full product line supply capacity, design capacity of 6 million tons / year, it is expected that the follow-up company car plate production still has stable room to rise.

The company's tinplate product structure is rich, and the proportion of high-end products is further increased. Domestic first milk powder can body with high-extension products, batch supply of domestic leading enterprises; deep drawing and cupping DI material exported to the world's largest metal packaging enterprise, to achieve batch supply; DR material to achieve 0.14mm ultra-thin specification batch production; the successful trial production of chromium-free passivation high-end tinplate, corrosion resistance far superior to similar chromium products.

Investment advice and rating: the company's operating income from 2023 to 2025 is estimated to be 1201.94, 123.378 and 127.585 billion yuan, respectively, and the net profit is 11.83 million and 1.83 billion, respectively, and the corresponding EPS is 0.15, 0.16 and 0.17 respectively. The sluggish demand in the iron and steel industry led to a decline in the net profit per ton of the company's traditional steel products, but given the obvious advantages of the company's electrical steel, automotive plates, tinplate and other products and the continuous improvement of the product structure, the company was given a "holding" rating.

Risk tips: sluggish demand for electrical steel products, the risk that the company's electrical steel sales are less than expected; the risk that the growth rate of new energy vehicle sales slows down and the demand for automobile plates is lower than expected; and the risk that performance forecasts and valuation judgments are not as good as expected.