The listed company of the largest private steel enterprise in China, "main steel industry + non-steel industry" coordinated development: the company is a listed company of Shagang Group, the largest private steel enterprise in China, as of 2023H1 Shagang Group holds 27% of the shares. At present, the company is mainly engaged in the production and sales of ferrous metal smelting and Calendering special steel. The company has an annual production capacity of 3.2 million tons of excellent special steel in 2022. The company's revenue is highly related to the price of high-quality steel, and the company's performance has improved after the industry supply-side reform. From 2011 to 2015, steel enterprises had overcapacity, steel prices fell, and revenue was under pressure. after the supply-side reform began in 2016, the company's revenue began to grow steadily, and its performance changed from loss to profit. In 2016-2022, the revenue CAGR was 15.7%. In 2022, the net profit was 450 million yuan. It is expected that the steel demand will stabilize with the national steel industry "steady growth" policy in the future. Superimposed companies are expected to increase profitability by reducing costs and increasing efficiency. The company's business is mainly in the iron and steel industry, supplemented by non-steel business. The company's business, the steel industry, accounts for about 90% of the total revenue.

Iron and steel industry supply is strong and demand is weak, profitability is waiting to be improved, optimistic about green and low carbon to drive the high-quality development of the industry: 1) the supply trend of the iron and steel industry is stable, demand is gradually weakening, and competition is intensified. In 2011-2022, China's crude steel output CAGR was 3.5%. Iron and steel output declined for two consecutive years, and the supply trend tended to be stable. The apparent consumption of steel is mainly dragged down by the contraction of downstream real estate and infrastructure demand. The CR10 market share of steel enterprise output in 2022 is 43%, which is still much higher than that of the 13th five-year Plan of Iron and Steel by 2025. According to the World Steel Association's forecast that China's steel consumption will be flat in 2023, we expect that demand will stabilize in the future and supply will be further concentrated to the head. 2) the price of steel raw materials is rising, and the profit is low, waiting for improvement. Raw materials account for 70-80% of the cost composition of the iron and steel industry. Iron ore and coking coal prices have risen sharply in the past three years due to global inflationary pressures. as of September 22, 2023, iron ore prices are above the historical 85th percentile, coking coal prices are at the historical 80th percentile level, and the PMI index of the iron and steel industry in 2022 is 42.6% YoyoyRa0.8pct. Profits need to be improved urgently. 3) the future supply and demand structure needs to be optimized, and green and low carbon is the future development trend of the industry. The iron and steel industry is not only an important basic industry in China, but also a key industry in urgent need of carbon reduction. During the 14th five-year Plan period, the state proposes to achieve a high-quality development pattern of reasonable structure, stable supply of resources, advanced technology and equipment, strong global competitiveness, green and low-carbon sustainable development of the iron and steel industry in 2025.

"High-quality products" + "strong R & D and technological transformation" + "strong parent company strength" to build core competitiveness: 1) strict control of high-quality products, strong brand certification advantages are recognized by customers: in 2022, the company completed 28 product certifications, successfully developed 34 high-end new products such as R3 mooring Lianyuan Steel, and at the same time newly launched or continuously promoted 13 product certifications. The goal is to develop new products 30 + in 2023. With the high quality of our products, the company continues to develop new customers, with an average of 183new customers per year from 2018 to 2022, and a total of 213new customers in 2022. 2) go deep into the field of scientific and technological innovation, increase investment in R & D and strengthen the advantage of reducing cost and increasing efficiency: the number of patents obtained by the company has increased rapidly in the past two years, with 67 patents, more than 4 times the number in 2020, promoting the company's technological progress. At the same time, the company has comprehensively accelerated the construction of key technical renovation projects, implementing a total of 53 technical renovation projects in 2022, including 8 proposed projects such as blast furnace technical renovation projects, 9 projects under construction such as electric furnaces, and 36 completed projects such as extended processing of fine bars, in order to maximize benefits. 3) the parent company Shagang Group is strong, rich in assets or plus business development: the parent company Shagang Group is the largest electric furnace steel production base in the country and the largest iron and steel enterprise in the world. At present, the group has five major production bases, and its products are exported to more than 100 countries and regions around the world. In 2022, Shagang Group entered the list of the world's top 500 for the 14th year in a row, ranking 291, 17 places higher than the previous year. Shagang Group develops the integrated business of "steel industry + non-steel industry". The non-steel industry involves five types: resources and environment, trade logistics, financial industry, new materials and service industry.

Profit forecast and investment rating: we expect the company's EPS to be 0.1,0.2,0.2 yuan per share respectively from 2023 to 2025, and the corresponding PE is respectively times that of 33-26-19. Based on the company's R & D advantages and brand advantages, coverage for the first time, given the "holding" rating.

Risk tips: increased competition; raw material price fluctuations; product price fluctuations; macroeconomic fluctuations lead to lower-than-expected sales.