Investment points: in the first half of 2019, the company achieved a total operating income of 9.889 billion yuan, a decrease of 5.36% over the same period last year, and a net profit of 549 million yuan, an increase of 97.03% over the same period last year, or about 0.40 yuan of diluted EPS, which is in line with our expectations. Among them, the total operating income in the second quarter was 4.621 billion yuan, down 19.20 percent from the same period last year, and the net profit was 337 million yuan, an increase of 376.02 percent over the same period last year and 58.77 percent from the previous quarter.
Supply and demand are booming, and the price of ferrosilicon and manganese is stable as a whole in the second quarter. According to Mysteel data, national ferrosilicon production increased by 2.84% month-on-month in the second quarter, while downstream crude steel production increased by 13% month-on-month. Under the growth of demand, the price of ferrosilicon rebounded slightly, and the price of iron ore in Ordos region increased slightly by 0.84% compared with the previous month. In terms of silicon and manganese, the national output increased by 16.38% in the second quarter compared with the previous quarter, and the price of silicon and manganese in Inner Mongolia decreased by 3.18% compared with the previous quarter. The company adjusts the corresponding product structure according to the changes in the market price of ferrosilicon, silicon and manganese. In the first half of the year, the output of ferrosilicon and silicon and manganese was 79.37 and 134800 tons respectively, up 0.92% and 27.64% respectively over the same period last year.
Period fees and minority shareholders' rights and interests decreased, while investment income increased. The company's performance improved in the second quarter compared with the previous quarter. In the second quarter, the company's gross profit margin was 26.48%, an increase of 2.42% over the same period last year, which was basically the same as the previous quarter, and the product profitability was better. During the second quarter, the company's expenses decreased by 194 million yuan compared with the same period last year, of which the financial expenses decreased by 222 million yuan compared with the same period last year, and the company's investment income in joint ventures and joint ventures increased by 136 million yuan and 56 million compared with the same period last year. At the same time, due to the completion of 14.06% equity acquisition in power metallurgy, minority shareholders' rights and interests decreased by 74 million yuan compared with the same period last year, and 5900 million compared with the same period last year.
The acquisition of shares in power metallurgical companies to further strengthen the "coal-electricity-ferrosilicon alloy" industry chain. The company has a complete "coal-electricity-ferrosilicon alloy" industry chain, has coal mines and pit mouth self-provided power plants, the production of electricity is almost 100% self-sufficient, and the power cost accounts for about 70%, 20% and 50% of the production costs of ferrosilicon, silicon and manganese, PVC, so the company's performance is flexible under the alloy price increase. On April 1, the company completed the acquisition of 14.06% of the equity held by Inner Mongolia Ordos Cashmere Group Co., Ltd., the controlling shareholder of the company, so as to further strengthen its integrated metallurgical industry chain.
Maintain earnings forecasts and maintain "overweight" ratings. The company's "circular economy" model has strong advantages in raw material reserves and power costs. It is estimated that the home net profit from 2019 to 2021 is 9.26 million yuan for PE, which corresponds to 0.68 yuan for PE and 0.63 million yuan for Universe. The current stock price corresponds to the times of PE on 11-12-13. Maintain the "overweight" rating.
