Main points of investment:
Maintain the "overweight" rating. The company achieved revenue of 94.293 billion yuan in the first three quarters of 2019, up 4.07% from the same period last year; the net profit of returning to the mother was 1.783 billion yuan, down 47.11% from the same period last year; the revenue of the company's Q3 in a single quarter was 31.899 billion yuan, down 7.36% from the same period last year; and the net profit of the company in the first three quarters was 3.62,8.06 and 613 million yuan, respectively. In 2019-2021, the company raised its EPS to 0.26 yuan (0.24) to 0.24 yuan (previously 0.16 yuan), and maintained the company's target price of 3.34 yuan, taking into account the sharp upward supply of the industry and the sharp rise in iron ore prices at the cost side.
The cost goes up. The company's gross profit margin fell slightly. In the first three quarters of 2019, the company's gross profit margin and net profit margin were 10.69% and 2.19% respectively, down 2.16% and 3.2% respectively from the same period last year. The decline in the company's net gross profit margin is mainly due to a sharp rise in iron ore prices at the cost end compared with the same period last year. Global iron ore supply continued to pick up in the fourth quarter of 2019, and ore prices may fall at a high level.
Management costs continue to decline, and the overall cost continues to be optimized. The company's expense rate during the first three quarters of 2019 was 7.54%, down 0.45% from the whole of 2018, of which the management expense rate was 3.20%, down 1.59% from the whole of 2018.
In the fourth quarter, steel demand is not weak and mineral prices are high, and the company's performance is expected to pick up. Macro data show that the toughness of real estate is still there, infrastructure is gradually warming up, and the recent continuous removal of steel stocks confirms our view that steel demand is strong. In addition, environmental protection production restrictions are weak in 2019, and the company, as the leading steel enterprise in Beijing, Tianjin and Hebei, will fully benefit from the strong steel demand and marginal relaxation of environmental protection pressure, its annual steel production and sales will remain at a high level, and under the background of falling mineral prices, the company's performance is expected to pick up.
Risk hint: macroeconomic decline accelerated; supply-side rise exceeded expectations.
