Event: the total operating income in the first three quarters of 2023 was 85.02 billion yuan,-7.27% compared with the same period last year, and the net profit was 950 million yuan,-46.59% compared with the same period last year. In 2023, Q3 achieved operating income of 27.652 billion yuan,-0.72% compared with the same period last year, and Q3 realized a net profit of 540 million yuan compared with the previous year, + 2840.49% and + 15.19%, respectively.
The price difference between hot and cold rolling is the highest in the same period of five years, and cold rolling accounts for 43 per cent of 2023H1's products.
Since June 2023, the price difference between cold and hot rolling in Shanghai has been at the highest level in the same period of 5 years. As of October 26, the price difference between cold and hot rolling is 870 yuan / ton, indicating that the price performance of cold rolling is significantly better than that of hot rolling. Shougang shares in the product structure of cold rolling is relatively high, is expected to fully benefit from the increase in cold rolling prices, 2023H1 cold-rolled products sales of 4.6735 million tons, accounting for 43%.
The company's product structure has been continuously optimized, and the output proportion of 2023H1 strategy and key products has reached a total of 3.13 million tons of 66%:2023H1 's three strategic products (electrical steel, automobile plate, tinplate), and 4.61 million tons of nine key products (cold rolled special steel, hot rolled pickling plate, weathering steel, energy steel, automobile structural steel, high strength construction machinery steel, pipeline steel, bridge steel, ship plate offshore steel). The total output of the strategy and key products is 7.74 million tons, accounting for 66% of the company's total steel output, an increase of 4 percentage points over the same period last year.
In April, the company completed the world's first professional production line of 100% thin specification, high magnetic induction oriented electrical steel. 2023H1 Zhixin electromagnetic electrical steel output is 848200 tons, of which oriented 135500 tons, year-on-year + 39.24%, non-oriented low grade 311700 tons, year-on-year + 15.68%, non-oriented high grade 400900 tons, year-on-year + 14.39%.
In April 2023, Zhixin electromagnetic completed the world's first professional production line of 100% thin specification, high magnetic induction oriented electrical steel, and the product structure is expected to be further upgraded in the future.
On September 29, the company announced plans to increase capital to Zhixin electromagnetic with the shareholding platform of Shougang Group and Zhixin electromagnetic employees:
Shougang Group, Shougang shares and Zhixin electromagnetic employee shareholding platform plan to increase capital to Zhixin electromagnetic, the amount of capital increase is not more than 1.605 billion yuan. Before this capital increase, Shougang shares are the controlling shareholders of Zhixin electromagnetic, with a shareholding ratio of 68.03%. After the capital increase, the identity of Shougang shares will remain unchanged. Zhixin electromagnetic will add two shareholders, Shougang Group and Zhixin electromagnetic employee shareholding platform. finally, the shareholding ratio of all parties shall be based on the industrial and commercial registration results of Zhixin electromagnetic's completion of this capital increase. This capital increase is conducive to Zhixin electromagnetic to increase cash flow, reduce financial expenses, fulfill the relevant agreements with shareholders and implement the employee stock ownership plan, which is conducive to the sustained and healthy development of Zhixin electromagnetic and the company.
Profit forecast, valuation and rating: due to the weak demand in the iron and steel industry, we have lowered the company's 2023-2024 net profit forecast by 81.98% and 80.92% to 14.24 yuan and 1.558 billion yuan respectively, and the new company's net profit forecast for 2025 is 1.763 billion yuan. The company's product structure continues to upgrade, and profitability is expected to further pick up and maintain the company's "overweight" rating.
Risk hint: product structure upgrade is not as expected; steel downstream demand repair is not as expected; industry crude steel output is higher than expected.