20H1 performance: the increase in steel volume and price drop contributed to a 5.5% year-on-year increase in revenue, and a sharp increase in fees and income tax expenses led to a 18.3% year-on-year drop in net profit. The total operating income of 20H1 was 14.55 billion yuan, up 5.5% from the same period last year, and the net profit returned to its mother was 820 million yuan, down 18.3% from the same period last year. The earnings per share was 0.34 yuan per share, 18.3% from the same period last year, and 9.7% (diluted), down 4.3PCT from the same period last year. (1) output: 20H1 produces 326,390 and 3.75 million tons of iron, steel and timber respectively, an increase of 2.4%, 7.0% and 8.6% over the same period last year. (2) Business structure: 20H1 Steel contributes 90% of revenue and accounts for more than 98% of gross profit, of which long wood contributes 60% of revenue and 80% of gross profit. (3) profitability: the gross profit margin of 20H1 steel decreased slightly compared with the same period last year, and the rate of management and R & D expenses increased slightly over the same period. (4) Operation quality: the cash ability of 20H1 has decreased, the operation ability is relatively stable, and the debt-paying ability is obviously improved. (5) Asset sale: 50% equity sale of Baote Shaoguan to JFE Iron and Steel Co., Ltd.
The plan for 2020 is to produce 7.2 million tons of steel and 2.68 million tons of coke, an increase of 1.0% and a decrease of 0.7% respectively over the actual output in 2019, and a planned investment of 2.18 billion yuan in infrastructure and technological transformation. The planned completion rates of 20H1 iron, steel and timber output are 50.9%, 52.3% and 52.1%, respectively.
The company focuses on: the supply and demand pattern of steel in Guangdong Province is good, the company is the largest steel enterprise in Guangdong Province, and the product market share is leading; the ability of cost control is strong, and the ability of purchasing, production and sales cost control is continuously improved; attach importance to research and development, actively promote product structure upgrading, profit resilience is expected to be enhanced; dividend situation is improved; the current PB_LF valuation since 2011 38.9%.
Profit forecast and investment advice: it is estimated that the EPS of the company in 20-22 is 0.73 PE 0.84 PB, corresponding to the closing price on September 18, 20-22, 5.89 and 4.89 times, respectively, and 1.06 times in 20-22. With reference to the valuation level of the comparable company, we estimate that the reasonable PB of the company in 20 years is about 1.3 times. Based on the 20-year forecast net assets per share of 4.06 yuan, the reasonable value of the company is 5.28 yuan per share, corresponding to about 7 times of PE in 20 years, maintaining the "buy" rating.
Risk hint. Macroeconomic fluctuations; mainstream mineral production is not up to expectations, iron ore prices have risen sharply; the completion of planned production is lower than expected; the impact of COVID-19 epidemic on demand.