Quarterly performance rebounded, and profit performance was superior to that of the industry. In the first half of 2023, industry demand was weak. The company focused on reducing costs and increasing efficiency and optimizing the product structure. It gave full play to the advantage of “one four yuan, one chain”, and its profit performance was superior to that of the industry. The company achieved operating income of 36.918 billion yuan, a year-on-year increase of 3.72%, and net profit of 989 million yuan, a year-on-year decrease of 36.80%. The second quarter achieved revenue of 19.021 billion yuan in a single quarter, an increase of 6.28% over the previous quarter, and net profit for the second quarter was 613 million yuan, an increase of 62.91% over the previous quarter.

Product structure upgrade to strengthen cost transmission capability. In recent years, the company has continued to increase investment in R&D, deeply cultivate the advantages of thick plates, and strengthen research and development of long special steel materials. The volume and price of high-value-added products have risen sharply. A variety of advanced steel materials have been developed, and 9% Ni steel for ultra-low temperature has won the country's “Single Champion Product” in the manufacturing industry. In the first half of the year, the company achieved steel sales volume of 5.146,400 tons, an increase of 8.04% over the previous year. Among them, sales of advanced steel materials were 1,295,500 tons, an increase of 45.97% over the previous year, and the share further increased to 25.18%. The company's comprehensive average sales price of steel is 4767.16 yuan/ton (excluding tax), a year-on-year decrease of 7.09%. The comprehensive average sales price of advanced steel materials is 6214.47 yuan/ton (excluding tax), a year-on-year decrease of 0.33%, and the price is relatively stable.

In terms of profitability, advanced steel materials achieved a total gross profit of 1,315 million yuan, accounting for 42.38% of the total gross profit of steel products. The gross margin was 16.33%, and the gross profit per ton was 1,015 yuan/ton, which has strong profitability.

The four-yuan chain has a rich layout, creating multiple profit growth points. In recent years, the company has actively expanded its ecology around the steel industry chain, and related achievements have gradually been shown. In terms of extending the industrial chain, the company's overseas coke project with an annual output of 6.5 million tons is progressing in an orderly manner. Among them, Indonesia's Jinrui New Energy Project produces 2.6 million tons of coke per year, 1 #、2 #、3 #焦炉已投运，4 #焦炉正在砌炉，上半年实现焦炭销量59 .75 million tons, and achieved net profit of 71 million yuan. Indonesia Jinxiang New Energy's 3.9 million ton coke project, 2 #焦炉已点火烘炉，项目正在按序推进施工。 Jin'an Mining has an annual production capacity of 900,000 tons of iron powder and achieved a net profit of 178 million yuan in the first half of the year. In terms of diversified industrial operations, the company has built a “four-yuan” industry of new materials, new intelligence, new energy rings, and new connectivity. Among them, gold element composites completed explosive compounding for the first time, forming a dual process production capacity of “hot rolled composite plate+explosive composite board”; as an excellent integrated service provider in the water and environment field, Baizhong Environmental achieved net profit of 151 million yuan in the first half of the year, with steady performance.

Risk warning: The demand side declined beyond expectations; production control fell short of expectations; raw material price fluctuations exceeded expectations; project construction progress fell short of expectations; indirect controlling shareholders proposed changes.

Investment suggestions: The company is an established leading medium and heavy plate enterprise. Special steel products are developing rapidly, and coke projects are progressing in an orderly manner. Considering the weak demand and operation of the steel industry, we lowered our performance forecast. We expect the company to have revenue of 774.3/831.1/8634 billion yuan in 2023-2025, a year-on-year growth rate of 9.6%/7.3%/3.9%, a year-on-year net profit of 23.5/2.58/2.76 billion yuan, a year-on-year growth rate of 8.6%/9.9%/7.1%; diluted EPS is 0.38/0.42/0.45 yuan, and the current stock price corresponds to PE 9.6/8.7/8.1x, maintaining the “increase in holding” rating.