This report is read as follows:
The company is the leading steel enterprise in southwest China. After the completion of the reorganization, the asset-liability ratio has dropped significantly and the steel production has been stable. The company's production increase and cost reduction will continue to contribute to the company's performance increment.
Main points of investment:
Coverage for the first time, giving a "overweight" rating. The company is a leading steel enterprise in Sichuan and Chongqing, and its production has recovered well after the reorganization. We estimate that the EPS of the company in 2019-2021 will be 0.12,0.15,0.16 respectively. Referring to the same type of iron and steel companies, we will give the company a valuation of 1.02 times PB in 2019, corresponding to the stock price of 2.24 yuan, with a "overweight" rating.
Restructuring new students, production increases superimposed cost cuts, the company's performance may exceed expectations. After the company completed its restructuring in 2017, production has recovered well since 2018, with operating income and net profit rising sharply. It is expected that with the optimization of the company's production capacity and the increase of production, the company's performance will continue to release.
Debt has fallen sharply, internal governance has been straightened out, and employee stock ownership plans have enabled the company to grow. After the restructuring of the company, the asset-liability ratio dropped from 100.29% to 31.19%, and the debt burden was greatly reduced. In 2018, the company successively revised the articles of association and the rules of procedure of the board of directors and the board of supervisors, and completed the straightening out of the internal mechanism. the company's crude steel output reached a record high of 6.3815 million tons in 2018. At the same time, the company began a three-year employee stock ownership plan in 2018, so that the company's employees and owners have the same interests, and continue to reduce costs and increase efficiency in the later stage of the company.
Deeply ploughing the Sichuan-Chongqing market, the output has increased steadily. The company ploughs the Sichuan-Chongqing market, and the market share of medium and heavy plates and hot-rolled products in Chongqing is more than 80%; in Chengdu, the market share is more than 60% and 25% respectively, and the company has obvious advantages in the southwest region. The company has a crude steel production capacity of 8.4 million tons and an effective production capacity of 6.4 million tons. The company's steel production has increased steadily in 2018, but with the company's technological transformation, the company's effective production capacity may gradually increase, and the company's steel production may be gradually released in the future.
Risk hint: steel supply continues to rise; steel prices fall sharply.