The largest comprehensive steel enterprise in Xinjiang. The company is the largest steel enterprise in Xinjiang, and is one of the two major steel production bases in Northwest China, with a steel production capacity of about 7.7 million tons. After the impact of the epidemic and special seasonal factors abated, the company achieved a net profit of 69 million yuan in the first half of the year, down 44.03% from the same period last year. Among them, the net profit of Q1 and Q2 was-191 million yuan and 260 million yuan respectively, and the overall performance of Q2 improved significantly.
Xinjiang iron and steel industry: the steel plate of Gao Beta. The unique geographical location makes Xinjiang iron and steel industry the only real closed market in the country, which gives Xinjiang iron and steel industry and enterprises inherent high flexibility. The above bull market as an example: the price premium of Xinjiang steel over the mainland reached 950 yuan / ton in 2007, while Bayi Iron and Steel was the strongest stock in the 2011-2011 steel bull market.
Infrastructure investment in Xinjiang continues to develop. From January to July this year, the total amount of fixed asset investment in Xinjiang reached 25.5% compared with the same period last year. According to the semi-annual report of Baosteel, in the first half of the year, the company stepped up the docking of key projects in Xinjiang, focusing on airport reconstruction and expansion projects, Ehe project, Xinjiang CRRC wind power project, Ebinur Lake project, etc., with sales of 1.87 million tons in the second quarter, an increase of 16.3% over the same period last year. In the first half of the year, the company's market share of building materials in Xinjiang is 35.8%, and the market share of plate in Xinjiang is 73%. The company's leading position in Xinjiang and its high elasticity have been shown.
Baosteel is expected to lead a new round of Xinjiang steel industry integration. In March this year, Xinjiang Bayi Iron and Steel Co., Ltd., China Baowu Iron and Steel Group Co., Ltd., and Huabao Investment Co., Ltd. jointly invested 1 billion yuan to establish Xinjiang Tianshan Iron and Steel Co., Ltd. Commenting on Baosteel's 2020 business plan, Chen Derong, chairman of Baowu Group, said, "there are a number of strategic tasks for Baosteel in 2020," according to mysteel News.
To complete the integration of production capacity in Xinjiang, it is necessary to regard this work as the top priority of the No. 1 project. " We believe that in the future, as a leader in Xinjiang, Baosteel is more likely to lead a round of integration of steel enterprises in Xinjiang.
Profit Forecast & Investment suggestion
It is estimated that in 20-20 years, the company's operating income will be 21.584 billion yuan, 22.236 billion yuan and 22.907 billion yuan, up 4.7%, 3.0% and 3.0% over the same period last year, and the net profit will be 418 million yuan, 559 million yuan and 579 million yuan respectively, an increase of 275.9%, 33.8% and 3.6% over the same period last year, and the corresponding PE is 13.6 times, 10.2 times and 9.9 times respectively. Considering the high flexibility in the company's history, the company is valued at 11x in 2020, with a target price of 4.0 yuan, covering the company's "overweight" rating for the first time.
Risk hint
The policy of infrastructure investment in Xinjiang is sustained; the release of steel replacement capacity exceeds expectations.