Performance summary: according to the 2019 semi-annual report, the company achieved operating income of 10.634 billion yuan in the first half of the year, an increase of 5.5% over the same period last year; the net profit attributed to shareholders of listed companies was 380 million yuan, down 49.2% from the same period last year; and the net profit after deducting non-return was 386 million yuan, down 48.5% from the same period last year. During the reporting period, the EPS was 0.14 yuan, and the EPS in a single quarter was 0.02 yuan and 0.11 yuan respectively.
Ton steel data: during the reporting period, the company produced 2.7 million tons of iron, 2.92 million tons of steel and 2.91 million tons of materials, up 6.7%, 8.4% and 8.9% respectively over the same period last year. Combined with the semi-annual report data, the price of comprehensive ton steel is 3643 yuan, the cost of comprehensive ton steel is 3322 yuan, and the gross profit per ton steel is 321 yuan, which is-101,120yuan and-221yuan respectively over the same period last year.
The improvement in demand led to a month-on-month rebound in profits in the second quarter: in the first half of the year, under the strong pull of the real estate engine, the apparent demand for steel increased by 12%. However, due to the relaxation of environmental production restrictions, replacement capacity put into production, enterprises' own production efficiency and other factors led to continuous pressurization on the supply side, industry-level profits fell sharply. From a quarterly point of view, with the development of demand in the peak season in the second quarter, the profit increased significantly compared with the previous quarter. According to the operating data disclosed by the company, the steel output in the first and second quarters was 1.43 million tons and 1.48 million tons respectively. According to this, the company's net profit per ton of steel in the second quarter was estimated to be 210yuan, an increase of 162yuan compared with the previous quarter. As the largest rod and wire rod production base in the northeast region, the proportion of rod and wire rod is close to 80%, and the profit trend is basically consistent with the industry. In terms of financial data, sales expenses decreased by 20.7% compared with the same period last year, mainly due to a sharp drop in transportation costs; R & D expenses increased by 39.4% year-on-year, mainly due to the payment of technical service fees in the current period; inventory decreased by 36.5% compared with the beginning of the year, mainly due to the consumption of winter inventory and the reduction of steel inventory.
Focus on the recovery of demand in the peak season: steel prices have fallen sharply since July. On the one hand, the tightening of the financing end of real estate has caused the market to worry about the persistence of demand, on the other hand, under the background of seasonal weakening of demand, the maintenance of high levels on the supply side has led to excessive inventory accumulation and increased pessimism in the industrial chain. The latest macroeconomic data show that overall demand remains strong, the off-season is coming to an end at this stage, inventories have been continuously removed in the past two weeks, and market sentiment has stabilized. If the recovery of terminal demand in peak season is strong and the phased increase of superimposed supply side is limited, the profit of the industry is expected to expand further.
Investment advice: benefiting from the strong trend of steel downstream demand, the company's profit ring improved greatly in the second quarter, and the recovery of demand in the follow-up peak season is worth paying attention to. If strong, it is expected to repair the pessimistic expectations of the market. Steel stocks have a chance to rebound. From 2019 to 2021, the company's EPS is expected to be 0.22,0.24 and 0.25yuan respectively, corresponding to 13x, 12x and 11x respectively, maintaining the "overweight" rating.
Risk hint: macroeconomic decline is expected, the supply side increases risk.
