Event
On April 30, 2019, the company released its first quarterly report of 2019. During the reporting period, the company achieved a total net profit of 69 million yuan, compared with 255 million yuan in the same period last year, down 73.08 percent from the same period last year.
At the same time, the company released first-quarter operating data. The company's output of profile, plate and strip and pipe was 1.1143 million tons, 297100 tons and 15800 tons respectively, up 15.01%, 7.60% and 95.40% respectively over the same period last year; and the sales volume was 1.1461 million tons, 302000 tons and 183,000 tons respectively, up 30.66%, 11.81% and 174.52% respectively over the same period last year.
The operating income increased compared with the same period last year, but the net profit decreased significantly.
The company is mainly engaged in profiles, plate and strip and a small number of pipes. According to the company announcement, in the first quarter of this year, the average selling prices of profiles, plates and strips and pipes were 3299.09 yuan / ton, 3172.45 yuan / ton and 3735.43 yuan / ton respectively, down 5.64%, 6.24% and 17.97% respectively from the same period last year. The average sales price of the company's pipe products has declined significantly, but because the pipe products account for a relatively small proportion, it has little impact on revenue. During the same period, the sales of the company's three types of products increased by 30.66%, 11.81% and 174.52% respectively compared with the same period last year. Although the average sales price declined slightly, the sales volume of the main products increased significantly, resulting in a year-on-year increase in the company's operating income.
On the other hand, affected by the dam break of Vale SA in Brazil and the hurricane in Australia, iron ore prices have risen significantly since the beginning of this year. Take the iron ore price index of Sinosteel as an example, the iron ore price index in the first quarter of this year was 664 yuan / ton, compared with 561 yuan / ton in the same period last year, up 18.36% from the same period last year. The cost of raw materials has risen sharply, which has greatly reduced the company's profit per ton of steel, resulting in a significant decline in net profit.
Fang University is expected to continue to improve the management efficiency of the company in the later stage of formal shareholding.
The company is an important long-wood production base in Northeast China. On February 26 this year, Fangda transferred 6.23% of the company's shares through agreement. Fang Da Department officially bought shares in Linggang, which is expected to continue to improve the management efficiency of the company.
The United States may untie the DPRK and superimpose Xiongan into the stage of large-scale development and construction. Northeast building materials enterprises are expected to benefit directly.
In February this year, DPRK-US leaders met in Hanoi, and DPRK-US relations gradually eased. If North Korea achieves a real transformation and economic development, steel consumption will increase rapidly. At the beginning of North Korea's economic construction, early steel still needs to be imported. China, as North Korea's neighbor, is very likely to become North Korea's main steel importer. As an important guiding policy for the Chinese government to adjust and optimize the urban layout and spatial structure of Beijing, Tianjin and Hebei, the construction of Xiongan New area has a huge demand for steel in the later period, and the company is expected to benefit from the development of North Korea and the construction of Xiongan New area. I am optimistic about the company's profitability in the later period.
The late performance is expected to maintain a stable "buy" rating.
With the end of production capacity, we believe that the future performance of the company will be stable. We will adjust the company's EPS from 0.77 yuan / share and 0.99 yuan / share to 0.44 yuan / share and 0.59 yuan / share in 2019-2020. it is estimated that EPS will be 0.75 yuan / share in 2021, maintaining the "buy" rating.
Risk tips: changes in Sino-Korean relations, the contraction of the company's net profit caused by the decline in steel prices, the output changes caused by the company's equipment production and maintenance, and the changes in operating costs caused by the company's own management.
