This report is read as follows:
The company's 2023H1 performance fell short of expectations. Steel demand is weak, steel prices fall, superimposed raw material prices decline slightly, the company's profits continue to be under pressure in the short term. With the gradual pick-up in demand, corporate profits are still expected to pick up.
Main points of investment:
Maintain the "overweight" rating. 2023H1 realized revenue of 23.268 billion yuan, down 12.66% from the same period last year, and its net profit was-173 million yuan, down 137.89% from the same period last year. Considering the weak demand and the pressure on the cost side, the company's 2023-2025 return net profit is estimated to be 0.46 trillion RMB (the original 428x82pm RMB 1.235 million), corresponding to EPS0.02/0.14/0.26 yuan. However, considering the company to optimize the product structure, profitability is expected to gradually pick up, maintain the target price of 5.67 yuan, maintain the "overweight" rating.
Production increased year-on-year, and profits continued to be under pressure. The output of iron, steel and timber of 2023H1 Company was 485.61, 560.81 and 5.5094 million tons respectively, an increase of 7.69%, 4.52% and 4.84% respectively over the same period last year. Due to weak steel demand and falling steel prices, the price of superimposed raw materials has declined slightly, and the company's profitability has declined. 2023H1's gross profit margin and net profit margin are 5.1% and-0.73% respectively, down 2.33% and 2.47% respectively from the same period last year. With the gradual pick-up in demand, corporate profits are still expected to pick up.
Optimize the product structure and increase the proportion of industrial materials. In the range of the company's regional market, the company is the only enterprise with medium and heavy plate, high-quality round bar and H-section steel production line. in recent years, the company is committed to optimizing product structure, increasing the proportion of industrial materials, and maintaining the differentiation advantage of regional variety structure. The H-beam production line newly built by Luoyuan Minguang, a subsidiary, was put into production in May 22, with a design capacity of 1.3 million tons per year. 2023H1's H-beam revenue accounted for 7.41%, up 6.06% from the same period last year. The contribution performance of the company's industrial materials is expected to continue to improve in the future.
The regional iron and steel leader has the advantage of premium. With a total steel production capacity of 1200 tons per year, the company is the leading steel enterprise in Fujian Province, with a market share of 48% for building materials, 70% for round steel, 80% for medium plate and more than 55% for section steel. The company will strengthen market maintenance and strive to sell building materials at a price higher than the average price of 10 yuan / ton in the four surrounding places.
Risk hint: raw material prices have risen sharply; steel has warmed up less than expected.