Event
On August 19, the company announced its semi-annual report for 2020: the company's revenue in the first half of 2020 was 23.003 billion yuan, an increase of 0.55% over the same period last year, and its net profit was 773 million yuan, down 38.93% from the same period last year.
The epidemic affected rising costs, steel prices fell under double extrusion, and the performance of the company's products were mainly medium plates and small profiles. in the first quarter of 20, due to the impact of the COVID-19 epidemic, various industries downstream of iron and steel stopped production in a large area, market demand shrank, logistics and transportation was blocked, domestic steel stocks continued to rise, and steel prices fell. The company's total steel output in the first half of 20 years was 4.1439 million tons, an increase of 6.06 percent over the same period last year; total sales volume was 4.169 million tons, an increase of 6.84 percent over the same period last year; and the average selling price of steel was 3171.59 yuan per ton, down 7.93 percent from the same period last year. On the cost side, affected by the superimposed epidemic of mining disasters in Brazil, iron ore prices continued to rise in the first half of 20 years. According to mysteel data, the forward spot price of 62% Australian fine ore in June 20 was US $109.10 / dry ton, up 5.11% from the previous month.
Under the pressure of the complex external environment, the company achieved 23.003 billion yuan in revenue in the first half of 20 years, an increase of 0.55% over the same period last year, but the double squeeze of rising costs and falling steel prices still hindered the company's profits, with a net profit of 773 million yuan in the first half of 20 years, down 38.93% from the same period last year.
Plan to increase capital to control Guangxi Iron and Steel to enhance location advantage
At present, the company is the most important large-scale iron and steel joint production enterprise in South China and Southwest China. While meeting the needs of South China, East China, Central China and Southwest China, the products are also exported to Southeast Asia, the United States, Europe, Africa and other countries and regions. In 2019, the company participated in Guangxi Iron and Steel's Fangchenggang Iron and Steel Base Project. The steel products of the project mainly include high-strength rebar, alloy steel bar, high-quality wire rod, hot-rolled broadband steel, cold-rolled plate, hot-dip galvanized coil and other industries. As of August 14, the company held a stake of 27.78% in Guangxi Iron and Steel. On August 15, the company issued a notice announcing that it was planning to increase its capital to Guangxi Iron and Steel Group Co., Ltd. in cash in accordance with legal procedures. After the completion of the capital increase, the company will become the controlling shareholder of Guangxi Iron and Steel and bring Guangxi Iron and Steel into the scope of the consolidated statement.
If this capital increase process is successfully completed, it will help the company to enhance the voting rights of the Fangchenggang steel base project, improve the company's existing product supply system, and optimize the product structure. At the same time, the company can take advantage of the location advantage of Fangchenggang steel base, actively open up the market of ASEAN countries, continue to enhance the company's industry status and brand influence, and further enhance the location advantage.
Investment suggestion
Due to the impact of the epidemic and rising raw material prices, the company's profit has declined, so we adjusted the company's 2020-2022EPS from 1.00 to 1.04 to 0.58, 0.61 and 0.64, maintaining the "buy" rating.
Risk tips: the construction of the Greater Bay area is not as expected, the price of raw materials fluctuates sharply and the company's own business changes.