This report is read as follows:
The company's 2019Q1 performance was slightly lower than expected, while gross profit and net profit per ton of steel declined compared with the same period last year. New real estate construction is strong in the short term, and with the continuous pick-up of infrastructure investment and the steady improvement of the company's management efficiency, the company's performance is expected to pick up quarter by quarter.
Main points of investment:
Maintain the "overweight" rating. The company's 2019Q1 realized operating income of 5.515 billion yuan, up 16.05% from the same period last year; the net profit returned to its mother was 69 million yuan, down 73.08% from the same period last year; and the company's Q1 performance was slightly lower than expected. Due to the strong supply side of the industry, the strong superimposed iron ore price led to a rise in the cost side, reducing the company's EPS from 2019-2021 to 0.21, 0.26, 0.31 yuan (formerly 0.37, 0.50, 0.55). The company's management efficiency is expected to improve strongly, giving the company a valuation of 18 times in 2019, lowering the company's target price to 3.78 yuan (formerly 4.88 yuan) and maintaining the "overweight" rating.
Sales continued to rise in the first quarter, with a year-on-year decline in gross profit per ton of steel. The company's steel sales in the first quarter of 2019 were 1.47 million tons, up 27.08 per cent from the same period last year and 13.06 per cent higher than 2018Q4. The average steel sales price of 2019Q1 Company is 3515 yuan / ton, the gross profit per ton of steel is 219 yuan / ton, and the net profit of corresponding ton steel is 47 yuan / ton, down 237 yuan / ton and 174 yuan / ton respectively compared with the same period last year. The company's gross profit per ton of steel and net profit have declined, mainly due to a sharp rise in costs due to the strong industry supply, suppressing steel prices and superimposing strong iron ore prices.
During the period, costs declined steadily and the balance sheet continued to be optimized. The third fee per ton of steel of 2019Q1 Company was 111yuan / ton, down 27 yuan / ton from the same period last year, and the expense rate during the period was 3.15% (excluding R & D expenses), down 0.34% from the same period last year, of which the financial expense rate was 0.52%, down 0.14% from the same period last year. 2019Q1's asset-liability ratio fell to 51.78%, maintaining a downward trend.
The demand for iron and steel is low before and after high, so it is optimistic that the management efficiency will continue to improve. New real estate construction in 2019 exceeded expectations, with infrastructure gradually picking up, steel demand is expected to be low before and after high, steel prices are easy to rise and difficult to fall, and the company's performance may pick up quarter by quarter. In the long run, the management efficiency of the company will continue to improve in the future, and the company's performance is expected to meet sustained growth.
Risk hint: macroeconomic decline accelerated; supply-side rise exceeded expectations.