This report is read as follows:
The company's 2019Q1 performance is slightly lower than expected, gross profit per ton of steel, net profit ratio has declined. New real estate construction in 2019 is short-term strong, with the rebound in infrastructure investment, steel demand is expected to continue to pick up, the company's 2019 performance will pick up quarter by quarter.
Main points of investment:
Maintain the "overweight" rating. The company's 2019Q1 realized operating income of 5.642 billion yuan, down 9.86% from the same period last year; the net profit returned to the mother was 57 million yuan, down 55.62% from the same period last year, and the company's performance was slightly lower than expected. Due to the strong industry supply and strong iron ore prices, the company's Q1 performance was slightly lower than expected, downgrading the company's EPS for 2019-2021 to 0.41, 0.45, 0.52 (formerly 0.74, 0.83, 0.86). The company, a regional leading steel company, gave the company 9 times its 2019 valuation, lowered its target price to 3.69 yuan (formerly 4.21 yuan), and maintained its "overweight" rating.
Sales declined in the first quarter compared with the same period last year, gross profit and net profit per ton of steel declined, and the company's profits were under short-term pressure. The company's steel sales in the first quarter of 2019 were 1.3194 million tons, down 18.13% from the same period last year. In the first quarter of 2019, the company's average steel sales price was 4276 yuan / ton, the gross profit per ton of steel was 409 yuan / ton, and the corresponding net profit per ton of steel was 43 yuan / ton, which decreased by 101 yuan / ton and 183 yuan / ton respectively compared with the whole of 2018. The main reason is that the strong downstream iron ore prices lead to the rise of costs and the seasonal growth of management expenses, and the company's profitability is under short-term pressure.
Operating cash flow rose slightly and the asset-liability ratio remained stable. The net operating cash flow of 2019Q1 was 760 million yuan, an increase of 3.27% over the same period last year, mainly due to the increase in the performance guarantee recovered by the company. The asset-liability ratio of 2019Q1 is 75.3%, which remains stable as a whole.
The company is a leading steel enterprise in the region, fully benefiting from the rebound in steel demand. In 2019, new real estate construction is still strong in the short term, infrastructure continues to pick up, cars basically hit bottom, steel demand is expected to gradually pick up, steel prices are easy to rise but difficult to fall. As the leader of Henan steel enterprises, the company has obvious competitive advantages and will fully benefit from the high profits brought about by rising steel demand and high steel prices. The company's performance is expected to pick up quarter by quarter.
Risk hint: macroeconomic decline accelerated; supply-side rise exceeded expectations.