Events:
Zhuzhou Metallurgical Group announced on the 28th that its operating income in the first three quarters was 9.031 billion yuan, down 9.94 percent from the same period last year. The net profit attributable to the owner of the parent company was 31.6265 million yuan, compared with a loss of 472 million yuan in the same period last year.
Main points of investment:
Prices are rising, fees are falling, and performance continues to improve month-on-month.
The company mainly focuses on the smelting of zinc and lead. As of the first half of 2016, the proportion of lead and zinc products reached 69.4%. Since 2016, lead and zinc prices have risen 24.9% and 42.1% respectively, which has become the key to the continuous improvement of the company's operating performance. The company's sales gross profit margin in the first three quarters was 5.5%, 5.4% and 6.4% respectively, which continued to improve month-on-month. In addition, the three fees of the company have decreased compared with the same period last year, and the effect of reducing cost and increasing efficiency is remarkable.
Hedging losses are a drag on profits and government subsidies are reduced
The net loss of the company's Q3 investment was 65.5 million yuan, mainly from the hedging loss caused by the sharp rise in annual commodity prices. In addition, the company received a government subsidy of 35.83 million yuan in the first three quarters, less than 51.8 million yuan in the same period last year, mainly due to a decrease in the return of VAT on comprehensive utilization of resources included in the profits and losses of the current period compared with the same period last year.
Improved operating cash flow and high asset-liability ratio
At the end of the third quarter, the company had a net inflow of operating cash of 64.11 million yuan, which was significantly better than that of-61.47 million yuan at the end of the second quarter. The company can withdraw 181 million of bank deposits at any time, which forms a guarantee for daily operation.
The company's total debt reached 5.61 billion, and the asset-liability ratio reached 97.3%, much higher than the industry average.
Of this total, short-term borrowing is 3.63 billion, and short-term borrowing has remained above 3.5 billion for four consecutive years. By the end of the third quarter, the long-term borrowing reached 818 million yuan, totaling 4.44 billion, and the interest expense exceeded 200 million. If the loan amount can be effectively reduced, it will have a significant positive impact on the company's profits.
Profit forecast
It is estimated that in the next three years, the EPS of the company will be 0.17,0.34 and 0.55 yuan respectively, and the corresponding PE will be 61.6X, 31.4X and 19.5X respectively, maintaining the "recommended" rating.
Risk hint
The price of zinc and lead products fell.