Main points of investment:
Event: the company issued an annual performance announcement for 2018, with a cumulative operating income of 22.639 billion yuan in 2018, an increase of 71.03% over the same period last year, and a net profit of 1.788 billion yuan, up 458.57% over the same period last year, and 1.678 billion yuan after deducting it, an increase of 189.71% over the same period last year. corresponding to basic earnings per share of 0.20 yuan, up 400% over the same period last year.
After judicial restructuring, the goal of "hemostasis" was exceeded, and the rise in product volume and price drove the company's revenue explosion. After the bankruptcy reorganization of the company through the introduction of four-source joint fund at the end of 2017, the production and marketing scale and profitability have been significantly improved. The company has an annual production capacity of 8.4 million tons of steel, based in Chongqing, deep ploughing Sichuan and Chongqing, and radiating southwest. Last year, it had a market share of more than 70% in Chongqing and 35% in Chengdu. The annual output of iron, steel and timber reached 5.6777 million tons, 6.3815 million tons and 6.1107 million tons, respectively, up 47.8%, 55.1% and 56.5% respectively over the same period last year.
According to the development path of "short-term hemostasis-medium-term hematopoiesis-long-term upgrading" after reorganization, the goal of "hemostasis" in the first stage has been achieved. In terms of sales, the company achieved 6.0464 million tons of billet sales, an increase of 63.62% over the same period last year. When the average billet price rose 9.56% year on year in 2018, the simultaneous increase in volume and price led to a 70.90% year-on-year increase in revenue.
The cost reduction work has achieved remarkable results, and the level of gross profit margin has been greatly improved. The company has vigorously promoted cost reduction planning, and the main technical and economic indicators such as coke thermal strength, sinter drum index, fuel ratio, blast furnace utilization coefficient, steelmaking steel consumption, steel rolling yield and other major technical and economic indicators have been significantly optimized, and the cost consumption level has been significantly reduced. Through the process to reduce costs and increase profits of more than 2.544 billion yuan, greatly exceeding the 967 million yuan profit reduction caused by the rising prices of raw materials such as ore, coal, alloy, scrap and so on. During the reporting period, the company's gross profit margin reached 13.06%, an increase of 9.84 percentage points over last year.
Accurate positioning, marketing system intensive cultivation. During the reporting period, establish direct supply, direct sales, straight hair system, optimize the channel structure. Through in-depth analysis of regional market and customer demand, a stable user group of Calendering processing, high-rise building and bridge engineering, steel structure, pressure vessel and other products has been formed; social warehouses and market direct sales points have been set up in Chongqing, Chengdu, Kunming and Guiyang to be close to the market, tap demand and find prices; integrate logistics resources to improve the circulation efficiency of finished products. In addition, the company also actively opened up a new world in the field of e-commerce, reached an e-commerce business strategic cooperation with European smelter in the past 18 years, and achieved a sales premium of nearly 100 million yuan through "package bidding", with a repurchase rate of more than 70%. The scientific reconstruction of the marketing system is an important way for the company to achieve the goal of "full sales" during the reporting period.
The asset-liability ratio continues to decline. Company 17 successfully resolved the huge debt crisis and survival crisis of 41.7 billion yuan by means of marketization, legalization and specialization at the end of the year, reducing the company's asset-liability ratio from nearly 100% to 32.82%, and stripping off 11.18 billion yuan of inefficient and invalid assets through judicial auctions, greatly tamping the asset base. During the reporting period, due to a sharp increase in profits, the company's asset-liability ratio further fell to 31.19%, well below the SW steel industry average of 53.18% over the same period. It is expected that as the company's profits continue, the debt ratio still has room to decline.
Actively promote the reform of the incentive mechanism and promote the long-term and stable development of the company. During the reporting period, the company also actively promoted the reform of the incentive mechanism, advocated performance orientation, and promoted the "horse racing mechanism". In March 18, the board of directors reviewed and disclosed the employee Stock ownership Plan (draft) from 2018 to 2020, which aims to fully mobilize the enthusiasm of employees, realize responsibility-sharing, risk-sharing and benefit-sharing, implement performance incentives and equity incentives at the same time, coordinate the interests of the management team, core backbone personnel and shareholders, promote the long-term stable development of the company and enhance the value of shareholders, and truly realize the common development of employees and enterprises.
Profit forecast and investment rating: we expect the company's operating income to be 2.216 billion yuan, 2.14 billion yuan and 2.209 billion yuan respectively from 2019 to 2021; net profit is 1.487 billion yuan, 1.487 billion yuan and 1.592 billion yuan respectively; EPS is 0.17,0.17,0.18 yuan respectively, and the corresponding PE is 13.6x, 13.6x and 12.7x respectively. Cover for the first time, giving the company a "recommended" rating.
Risk tips: 1, environmental production restrictions are not as expected; 2, downstream demand is not as expected.