Summary of events: the company released three quarterly results in 2023: in 2023 Q1-Q3, the company achieved revenue of 120.272 billion yuan, down 3.7% from the same period last year; net profit from home was 4.105 billion yuan, down 20% from the same period last year; and 3.996 billion yuan was deducted from non-return net profit, down 19.4% from the same period last year. 2023Q3, the company achieved revenue of 40.715 billion yuan, an increase of 1.3% over the same period last year, an increase of 2.7% over the same period last year; a net profit of 1.537 billion yuan, an increase of 17.3% over the same period last year, a decrease of 18.2%; and a net profit of 1.508 billion yuan, up 22.4% from the same period last year and a decrease of 18.2% over the previous year.
Comments: the toughness of gross margin shows, and the cost increases over the same period compared with the previous month.
The homing net profit of ① 2023Q3 vs 2023Q2:2023Q3 decreased by 343 million yuan compared with the previous month, and the main profit reduction points were fees and taxes (- 305 million yuan), minority shareholders' profit and loss (- 119 million yuan) and fair value change (- 2 million yuan). The gain points are gross profit (+ 26 million yuan), income tax (+ 28 million yuan), other / investment income (+ 24 million yuan), impairment loss (+ 4 million yuan), non-operating income and expenditure (+ 1 million yuan).
② 2023Q3 vs 2022Q3:2023Q3 's homing net profit increased by 227 million yuan compared with the same period last year, with the main increase in gross profit (+ 572 million yuan), other / investment income (+ 11 million yuan), fair value change (+ 8 million yuan) and non-operating income and expenditure (+ 3 million yuan). The main interest reduction points include fees and taxes (- 196 million yuan), minority shareholders' profits and losses (- 114 million yuan), impairment losses (- 49 million yuan), and income tax (- 9 million yuan).
Future core focus: regional leader, product structure optimization to accelerate ① regional leader, southern boutique steel production base. The company has production bases in Xiangtan City, Loudi City, Hengyang City and Yangjiang City, Guangdong Province, with a complete product structure and a wide range of downstream coverage industries. The company actively promotes the transformation of variety structure to "middle and high end", speeds up the upgrading of production line structure, and increases R & D investment. 2023H1, the company's key varieties of steel sales of 8.54 million tons, accounting for 63%, an increase of 3 percentage points over 2022; 5 major categories of 8 steel varieties to replace "imports." The company has created a number of "invisible champion" products in the market segment, driving the transformation of product structure from middle-and low-end homogenization to middle-and high-end boutique differentiation.
② Company speeds up the structural adjustment and upgrading of the production line. First, Valin Xianggang high-speed wire rod production line project mainly produces high-end spring steel, cold heading steel, bearing steel, steel cord, welding wire steel, structural steel and other high-end products. Second, the first step of the first phase of the cold rolled silicon steel product project of Valin Lianyuan Iron and Steel Co., Ltd. will be put into production at the end of June 2023, and the annual output of 200000 tons of non-oriented silicon steel will be achieved. At the same time, the second phase of the cold rolled silicon steel product project will be carried out in an orderly manner. Third, the upgrading and renovation project of the production line of Valin Henggang has been accelerated. Fourth, the second phase of the Automobile Plate Company project was put into production and introduced ArcelorMittal's innovative coating technology and the third generation ultra-high strength steel production technology.
Profit forecast and investment advice: as a leading enterprise in Hunan, the company's product structure is constantly optimized and upgraded, superimposed by the gradual recovery of the domestic economy to drive profits per ton of steel to pick up. We expect the company to achieve a net profit of 60.32 pounds per ton of steel in 2023-25, corresponding to the closing price of October 30, PE is 7, 5 and 4 times respectively, maintaining the "recommended" rating.
Risk hint: raw material prices rise, downstream demand is lower than expected, capacity release is not as expected.