The company's 2020Q3 realized operating income of 7.939 billion yuan and net profit of 389 million yuan, an increase of 0.98% and 37.75% respectively over the same period last year. Cost reduction and efficiency improvement has been carried out smoothly, and the company's profitability has been improved. The pattern of growth, weakness and strength is expected to continue, but reducing costs and efficiency gives the company's performance long-term flexibility. Maintain the "overweight" rating.
2020Q3's performance is stable and in line with expectations. In the first three quarters of 2020, the company achieved a total revenue of 22.489 billion yuan, an increase of 3.87% over the same period last year, and a net profit of 1.212 billion yuan, down 6.00% from the same period last year. In a single quarter, 2020Q3 achieved revenue of 7.939 billion yuan, an increase of 0.98% over the same period last year, a decrease of 4.07% from the previous month, and a net profit of 389 million yuan from the same period last year, an increase of 37.75% over the same period last year, and a decrease of 13.94% from the previous quarter, which was basically in line with expectations.
Measures to reduce costs and increase efficiency have been effective, and the company's profitability has been improved. In the context of long-term high prices of upstream raw materials, the company's strategy of reducing costs and increasing efficiency in raw material procurement, production capacity utilization and grass-roots management has achieved certain results. The average 2020Q3 price of iron ore calculated according to Platts index increased by 14.96% year-on-year and 24.23% month-on-month.
2020Q3 according to our estimates, the per ton cost of the company's products decreased by 8.42% compared with the same period last year, and increased by 1.51% month-on-month, significantly better than the industry average. In the third quarter, the comprehensive gross profit margin of the company's products was 12.16%, an increase of 4.75 PCT over the same period last year, and an increase of 1.95pcts compared with the same period last year. This is mainly due to the company's better cost control level, which drives the company's profitability.
The rate of three fees has been continuously optimized, and the cost of research and development has increased significantly. The sales / management / financial rates of 2020Q3 are 0.39%, 0.71%, 0.04% and 0.55 pct, respectively, compared with the same period last year. 0.05/+0.04/-0.13pct, respectively, with continuous optimization. Among them, the sharp decline in financial expenses is mainly due to the improvement of the company's capital structure and the early replacement of stock loans during the period of low interest rates. In the third quarter, the company's R & D expenditure was 381 million yuan, an increase of 486.98% over the same period last year and 216.10% month-on-month.
Risk factors: raw material prices rose higher than expected; downstream steel demand was lower than expected.
Investment suggestion: the company is a long-wood enterprise in Guangdong, with regional advantages and product structure advantages. Under the background of the current high raw materials compressing the profit space of steel mills, the company formulates a series of strategies to reduce costs and increase efficiency to enhance the resilience of profits. It is expected that the pattern of growth, weakness and strength will continue, and the landing of capacity replacement in the industry will bring supply-side easing. We slightly adjusted the company's EPS forecast for 2020-22 from 0.68 to 0.71 to 0.78. The company will be valued at 1.3 times PB in 2020, with a target price of 4.99 yuan and a "overweight" rating.
