Event: the company issued a report for the three quarters of 2020, with an operating income of 37.167 billion yuan, an increase of 5.82% over the same period last year, and a net profit of 1.236 billion yuan, down 16.72% from the same period last year.

Comments:

Q3 performance improved and the decline narrowed in the first three quarters. The company's revenue and homing net profit in the first three quarters grew by 5.82% and-16.72% respectively, and the decline continued to narrow, improving by 37.69% respectively over the same period last year. Q3 returned to its mother's net profit of 463 million in a single quarter, an increase of 111.87% over the same period last year. The decline in product profits may be related to the rise in the cost end. In the first three quarters, the gross profit margin and net profit margin were 7.43% and 3.32% respectively, slightly lower than in the first half of the year, by 0.25 and 0.04 percentage points respectively.

Production and sales grew steadily. Steel output in the first three quarters was 6.609 million tons, up 13.64 percent over the same period last year; sales were 6.617 million tons, up 14.27 percent over the same period last year; and the average unit price was 3200.64 yuan / ton, down 7.11 percent from the same period last year. From the perspective of product categories, the output of medium plate and small profiles increased by 9.33% and 14.66% respectively, of which the sales of small profiles increased significantly in the third quarter.

Increase investment in Guangxi Iron and Steel, work together to promote development. After the completion of this increase, it is expected to accumulate 91.41% of the final voting rights of Guangxi Iron and Steel, and will deeply participate in the follow-up construction of Fangchenggang Iron and Steel Base Project, which is conducive to the coordination of production and management in the future. the main products of the project include high-strength rebar, alloy steel bar, high-quality wire rod, hot-rolled wide band steel, cold-rolled steel, hot-dip galvanized coil and other steel for construction, automobile, machinery and other industries. It will help the company to improve the existing product supply system, further optimize the product structure, at the same time help to open up the market of ASEAN countries and enhance the strength of the company in many ways.

Investment suggestion: the company is the core subsidiary of the 50 largest steel companies in the world, Liugang Group, constantly improving the business structure, fine control, quality improvement and efficiency, is expected to maintain a sound operation. It is estimated that the EPS from 2020 to 2022 is 0.63 and 0.66, respectively, and the corresponding PE is 7.4, 7.0 and 6.8, respectively.

Risk hint: steel demand has fallen sharply and raw fuel prices have fluctuated sharply.