Items:
On August 2, 2018, Anyang Iron and Steel released its semi-annual report, which showed that the company's Q2 achieved a net profit of 888 million in a single quarter, an increase of 589% from the previous quarter.
Comments:
Based on quantity and price, revenue increased greatly: 2018Q1 was affected by production restrictions in the heating season, and the company's converter steel production decreased greatly, and the average monthly output of about 750000 tons was not fully restored until May. In addition, the company began to use a small electric furnace with a capacity of 100 tons in the heating season last year, and now it has basically achieved full production, with an average monthly output of about 60,000 tons, which is significantly higher than that of Q1 and the past. The increase in production is the cornerstone of the company's revenue and profit growth. The company's output disclosure is divided into profiles, plate and strip and others. The profiles include large and small profiles, 90% of the plate and strip are medium and thick plate and strip, and the rest are rebar and wire rod. The prices of 2018Q2 plate, strip and long wood have been improved in varying degrees, and the increase in price has also contributed to the increase in revenue of the enterprise.
Gross profit margin rose, profit per ton of steel improved: while revenue increased, the unit cost of products also decreased. The gross profit margin rose from 10% of Q1 to 15%, and the gross profit per ton of steel rose from 398 yuan / ton to 610 yuan / ton. The total amount of the three fees is basically the same as that of Q1 in the case of a substantial increase in revenue, so the increase in operating profit margin and operating profit per ton of steel is more obvious, with the operating profit margin rising from 2% of Q1 to 9% of Q2 and operating profit per ton of steel rising from 84 yuan of Q1 to 369 yuan per ton.
Tax shield deduction, magnifying earnings: the company made a loss of 2.55 billion in 2015, but made little recognition of deferred income tax assets. This leads to the magnification of profits directly when deductible losses offset taxes in future years. As a result of this part of the unrecognized deductible losses, the company's Q2 tax is only 7 million, greatly magnifying the company's profits.
Investment suggestion: combined with the above analysis, we expect the company to achieve an operating income of 346.51q357.56max in 2018-2020, and a net profit of 2.465max, 2.861 billion, and a corresponding EPS of 1.03max, and a PE of 5-5-4, maintaining the "recommended" rating.
Risk hint: heating season production limit increases, demand weakens.