This report is read as follows:
Benefiting from the rise in volume and prices of major products, the company's quarterly results are in line with expectations, and its profitability is still strong. The company is located in Henan, as the leader of regional steel enterprises, will fully benefit from high steel prices and environmental protection production restrictions.
Main points of investment:
Maintain the "overweight" rating. The company achieved revenue of 25.695 billion yuan in the first three quarters of 2018, up 28.07% from the same period last year, and its net profit was 1.573 billion yuan, up 61.03% from the same period last year. The net profit of the company in the first three quarters was 1.29,8.88 and 556 million yuan respectively. Based on the decline of the company's expenses, we have raised the company's 2018 EPS forecast for 2019 to 0.87 EPS 0.96 yuan (the original 0.78 Universe 0.84 yuan), and the new forecast for 2020 to 1.06 yuan. Refer to similar companies, give the company 5 times the valuation of PE in 2018, lower the company's target price to 4.35 yuan (formerly 6.33 yuan), and maintain the "overweight" rating.
The volume and price of products rose in the third quarter, and the company's profit remained high. The company's steel sales in the first three quarters of 2018 were 161,237 and 2.4 million tons respectively, up 11.53% from the same period last year. In the first three quarters, the price of per ton steel was 3883 yuan, 4005 yuan and 4137 yuan respectively, a sharp increase of 132 yuan per ton in the third quarter. In the first three quarters, the gross profit per ton of steel was 398 yuan, 610 yuan and 483 yuan per ton, respectively, and the net profit per ton of steel was 80,373,232 yuan per ton.
The company's balance sheet was further optimized and financial expenses fell sharply. The company's 2018Q3 asset-liability ratio fell 5.35 percentage points year-on-year to 75.13%. In the first three quarters of 2018, the company's financial expenses fell 17.22% year-on-year to 658 million yuan, continuing the downward trend. We expect the company's financial expenses to continue to decline in the fourth quarter as part of the company's short-term debt is repaid.
The company is a leading steel enterprise in the region, fully benefiting from high steel prices and environmental production restrictions. As the leader of Henan steel enterprises, the company fully benefits from the high profits brought about by high steel prices. The weather conditions in the Beijing-Tianjin-Hebei region are poor this year, and production restrictions in autumn and winter are not expected to be significantly relaxed, or further suppress supply and support steel prices. With the further reduction of financial expenses, the company's fourth-quarter results may remain high.
Risk hint: the macroeconomic downturn is accelerating, and the supply side is rising faster than expected.