3Q23 performance is in line with our expectations
The company announced 3Q23 results: revenue of 40.72 billion yuan, same / month ratio + 1.3 picks 2.7%, net profit of 1.54 billion yuan, month-on-month ratio + 17.3 picks up 18.2%. The company's performance declined slightly from the previous month mainly because the high price of 3Q raw materials eroded profits, and the company's performance was in line with expectations.
1) demand is low, and we estimate that the price of 3Q steel has dropped slightly. 3Q domestic demand is still in the doldrums, and steel prices continue to decline. The average prices of threads and hot rolls we track are 3Q month-on-month ratio of-1.8% to 4022 yuan / ton of 3751 pesos, which we believe is the main reason for the decline in revenue of 3Q. 2) the high price of raw materials erodes profits. The company's 3Q23 gross profit margin is the same as / month-on-month ratio + 1.2/-0.3ppt to 11.3%, mainly due to the overall downward price of 3Q industry chain, the supply and demand of raw materials is tight, which increases the 3Q cost pressure. We simulate thread / hot-rolled ton steel gross margin (real-time) year-on-year ratio of-145lap 83 yuan to 84gam20 yuan. 3) the rates remain stable during the period. The cost rate of the company during the 3Q period is from-0.1/+0.2ppt to 1.48%, and the management fee rate is from-0.2/+0.1ppt to 1.2%, which remains stable as a whole. 4) the asset structure remains sound, and the operating cash flow is greatly optimized. The asset-liability ratio of 3Q23 is 51.79%, and the net debt ratio is + 2.26ppt to 33% compared with the month-on-month ratio of + 1.15 to + 1.15, and the net debt ratio is + 2.26ppt to 33%. The operating cash flow of 3Q is 7.573 billion yuan, with a ratio of + 66.3 to + 131.2%. The substantial optimization of cash flow is mainly affected by the consolidation of financial companies.
Trend of development
The variety of steel continues to be optimized and upgraded, and the profit stability is continuously verified. The company's "variety steel" strategy has been continuously promoted, and the product structure has been continuously optimized and upgraded: 1) Silicon steel products have been gradually put into production: the first phase of silicon steel has been put into production, and the company expects that the first phase will contribute 200000 tons of high-grade non-oriented silicon steel production capacity. at the same time, the company is steadily advancing in the construction of the second phase, and the company expects the second phase to be completed by the end of the 24th. 2) the differentiation advantage of automobile plate is outstanding: the company takes the lead in lightweight and high strength of automobile plate. After introducing ArcelorMittal patented technology solution, it has obvious differentiation advantage in the field of new energy vehicle plate. We expect the company to contribute 15-200000 tons of sales increment of high-end automobile plate in 23 years.
From "general" to "special" profit stability continues to verify, in the context of steady growth, the company is optimistic to meet Davis double-click. We believe that the bottom profitability of the industry is continuing to verify the company's own "special steel" attributes, and the profitability and stability of its products are much higher than those of bulk steel. The current industry boom and market expectations are at the bottom, the company's profits are sound and stable, with a high margin of safety. With the recent government "steady growth" signal further clear, superimposed trillions of treasury bonds to pull downstream demand, we believe that the company as the core asset of the manufacturing industry will benefit, optimistic that the company will meet Davis double-click with demand and expected repair.
Profit forecast and valuation
We keep 23e homing net profit unchanged, maintain the company's industry rating, consider the gradual volume of steel varieties, increase 24e homing net profit by 3.6% to 9.492 billion yuan, the current stock price corresponds to 23/24e5.7x/4.2x 7.4x/5.5x E, considering that the company benefits from the recovery in manufacturing, it is expected to meet the valuation and repair, raising the target price by 22.6% to 7.60 yuan (corresponding to 23max 24e 7.4x/5.5x Pmax E) Implied 30.36% uplink space.
Risk
The property economy has fallen further; the global economy has accelerated its decline.