This report is read as follows:
The company's steel production and sales in the first three quarters of 2019 are stable, and its performance is under pressure due to cost factors. Macro data show that the toughness of real estate is strong, and automobile production and sales have warmed up. With the high iron ore prices falling, the company's performance is expected to pick up gradually.
Main points of investment:
Maintain the "overweight" rating. The company's revenue in the first three quarters of 2019 was 23.44 billion yuan, down 8.78% from the same period last year; the net profit returned to the mother was 378 million yuan, down 75.97% from the same period last year; the company's Q3 revenue in a single quarter was 8.552 billion yuan, down 13.86% from the same period last year; the company's Q3 net profit in a single quarter was 127 million yuan, and the company's Q3 performance was lower than expected. Taking into account the cost pressure brought about by the sharp rise in iron ore prices, superimposed the supply-side higher-than-expected rise, downgraded the company's EPS in 2019-2021 to 0.18max 0.20max 0.22 yuan (formerly 0.34cm 0.37max 0.43 yuan), the company's performance fell sharply, giving the company 2019 lower than the industry average of PB 0.75X for valuation, downgraded the company's target price to 2.61 yuan, "overweight" rating.
Gross margin per ton of steel decreased compared with the previous quarter, and the results in the third quarter were under pressure. In the first three quarters of 2019, the company's steel sales volume was 132,234 and 2.17 million tons respectively, the price per ton steel was 4276 yuan, 3946 yuan and 3947 yuan per ton respectively, and the cost per ton steel was 3867 yuan, 3486 yuan and 3546 yuan per ton respectively. The gross profit per ton steel was 409,460,400 yuan per ton respectively, the three fees per ton steel were 350,322,288 yuan per ton respectively, and the net profit per ton steel was 43,83,59 yuan per ton respectively.
The asset-liability ratio goes down, and expenses continue to be optimized during the period. At the end of the third quarter of 2019, the company's asset-liability ratio was 72.67%, down 1.8 percentage points from the whole of 2018. The company's expense rate during the first three quarters of 2019 was 7.86%, maintaining a low level, of which the financial expense rate was 2.35%, which continued to decline by 0.14% from the previous quarter.
Steel demand remains strong and ore prices fall, and the company's performance is expected to pick up. From our research and macro data show that real estate resilience, while infrastructure and automobile production and sales gradually pick up, steel demand in the fourth quarter need not be pessimistic, steel prices are easy to rise but difficult to fall. The company is the largest production base of fine plate and high-quality building materials in Henan Province, with obvious competitive advantage. Under the background of high iron ore prices falling, the company's performance is expected to pick up gradually.
Risk hint: macroeconomic decline accelerated; supply-side rise exceeded expectations.