Events:
Minguang of Sangang issued the annual report of 2022 and the quarterly report of 2023: the total operating income of the company in 2022 was 51.658 billion yuan, a decrease of 17.7% over the same period last year (comparable caliber, the full text is the same), and the net profit was 139 million yuan, a decrease of 96.5% over the same period last year. 2023Q1 achieved revenue of 11.97 billion yuan, down 6.8% from the same period last year, and realized net profit of-66 million yuan, down 112.5% from the same period last year.
Main points of investment:
2023Q1 revenue improved month-on-month, but the decline in average gross margin put pressure on short-term results. Under the impact of weak supply and demand and expected weakening in 2022, the overall profits of the iron and steel industry are under pressure, the production enthusiasm of steel enterprises decreased in the second half of the year, and actively and passively reduced production to alleviate the contradiction between supply and demand. The company produced 11.027 million tons of steel in 2022, down 3.3 percent from the same period last year; 9.363 million tons of pig iron, down 3.1 percent from the same period last year; 10.85 million tons of steel, down 4.7 percent from the same period last year; and the average selling price of the company's metallurgical manufacturing industry was 4398.2 yuan / ton, down 14.6 percent from the same period last year. Due to the decrease in commodity sales and selling prices and the high price of raw fuel upstream, the company's 2022 net profit decreased by 96.5% compared with the same period last year. 2023Q1's revenue is-6.8% quarter-on-quarter, respectively, 2.1%; net profit is 112.5% lower than the same period last year, mainly due to the decline in the company's average gross profit margin on steel.
During the period, the cost management can be controlled, and the cost advantage is highlighted. The company's expense rate during 2022 was 4.69%, year-on-year + 1.23pct, and the sales / management / R & D / financial expense rate was 0.09% 1.31% / 2.94% respectively. Among them, the R & D expense rate is year-on-year + 0.74pct, which is mainly due to the increase of product research and development and application. The company has solidly promoted the activities of "tapping the potential of the standard" and "reducing the cost of the whole process", constantly raising the cost reduction and efficiency work to a new height, and the cost per ton of steel in 2022 is less than 46.0% of the industry average.
Fujian area leader, establish brand characteristics, benefit from the steady growth of investment in the province. The company is the largest steel enterprise in Fujian Province, with Minguang headquarters, Quanzhou Minguang, Luoyuan Minguang and other major production bases, with an annual steel production capacity of more than 12 million tons, products including construction materials, medium and thick plates, H-section steel and other six series. The company's product sales are based on the steel demand of Fujian Province, based on the regional market, and radiate the surrounding provinces. The company's products are of high quality and are deeply welcomed by users, and the market share of building materials products is about 50%; the market share of round steel products in the province has been maintained at more than 70% for a long time, and the market share of medium plate products is stable at more than 80%. In 2022, fixed asset investment in Fujian Province will grow by 7.5%, which is higher than that of the whole country and leading the eastern part of the country. in 2023, the growth target of fixed investment in Fujian Province will be 6%, and 1580 key projects have been identified, with an estimated annual planned investment of 648 billion yuan. The company is expected to benefit from steady regional economic growth.
The financing and capital advantages of state-owned enterprises are significant. As a state-owned enterprise, the company has a good reputation in the bank financing system. At the end of 2022, the company obtained a comprehensive bank credit line of 32.6 billion yuan, a credit of 15.3 billion yuan, and a balance of 17.3 billion yuan, making full use of the advantages of true trade background and sufficient invoices between Yunshang and Minguang companies to open a financing channel for bank acceptance. The comprehensive capital cost of the company is controlled at 2.80%, the financing cost is greatly reduced, the asset-liability ratio is basically controlled at 50% level, and high-quality assets are tamped.
We expect that the iron and steel industry as a whole will continue to be under pressure in 2023, and the overall high and narrow range of steel prices will mainly fluctuate. The downstream demand side is relatively stable, the potential leveling factors of the industry in the second half of the year will alleviate the contradiction between supply and demand, and the profit side of the industry is expected to be repaired. The company is the leader in Fujian, with high popularity and market share, cost and capital advantages, and will continue to benefit from steady regional economic growth in the future. Therefore, we estimate that in 2023-2025, the operating income will be 522.5 billion yuan, 55.59 billion yuan, which is 1.1% 4.5% and 3.4%, respectively, and the net profit from home will be 4.7% 7.5%, 890 million yuan, an increase of 238.1%, 59.8%, 18.2%, corresponding to the 2023-2025 PE of 24.20, 15.14, 12.82 times, covering for the first time and giving the rating of "increasing holdings".
Risk hints: policy regulation is stronger than expected, macroeconomic growth is lower than expected, raw material prices fluctuate, downstream demand is lower than expected, product prices fall risk, infrastructure investment growth may not meet expectations.