Net profit to mother in '23 was -1.67% year-on-year, maintaining that “buy” rating companies achieved revenue of 72.5 billion yuan (yoy +2.65%) in '23, net profit of 2.125 billion yuan (yoy -1.67%); 23Q4 net profit of 460 million yuan (yoy +444%, qoq -31.9%). Considering that there is still no significant improvement in the steel industry, we expect the company's EPS to be 0.38/0.41/0.43 yuan in 24-26 (previous value: 0.43/0.48/- yuan), which is comparable to the company's PE (2024E) average value of 9.42X. Considering that the company's profit stability is strong and the dividend rate is higher than that of peers, the company will be given 13.5X PE in 24 years, corresponding to a target price of 5.13 yuan (previous value 4.50 yuan), maintaining the “buy” rating.

The share of advanced steel materials sales increased further, and profit resilience highlighted production and sales. According to the company's annual report, the company produced 10.3987 million tons of steel (yoy +5.63%) and sold 10.32,400 tons (yoy +5.91%) in 23, of which 2,587,900 tons (yoy +25.15%) of advanced steel materials were sold, accounting for 25.06% (yoy+3.85pct), accounting for a further increase in share. In terms of profit, the gross profit margin of the company's steel products was 12.24% (yoy-0.08pct), of which the gross profit margin of advanced steel materials was 16.03% (yoy+0.15pct), the gross profit margin of other steel products was 10.46% (yoy-0.53pct), and the gross profit contribution of advanced steel materials reached 41.98% (yoy+6.82pct), highlighting the profitability of the company's steel.

It has a stable position as a leader in medium and heavy boards. Joining CITIC Group to achieve strong joint companies target manufacturing upgrading and import substitution opportunities. R&D investment has continuously exceeded 3% of operating income for many years, cultivating many high-end products. Among them, 9% Ni steel for ultra-low temperatures has led the market share for more than 10 years, supplying many major national projects; at the same time, in the shipping sector, the company exclusively owns the first domestic large-scale domestic cruise ship “Aida Mordu” and supplies leading companies such as Saudi Aramco in the oil and gas sector, and exports of high-value-added products increased dramatically in 2023. Furthermore, the actual controller of the company was changed to CITIC Group, which further complements each other's advantages and mutual assistance in areas such as main business collaboration and financial resource sharing.

Indonesia's coke project output continues to be released, and the profit contribution gradually reflects Indonesia's Jinrui New Energy achieved coke sales of 1.466 million tons (yoy +390%) in 2023, achieving operating income of 3,908 million yuan (yoy +326%), net profit of 139 million yuan (yoy +548%), and a net profit of 95.2 yuan/ton. By the end of 2023, Jinrui New Energy's 4-seat coke ovens have all been put into operation, Jinxiang New Energy's No. 2 coke oven has been put into operation, No. 3 coke oven has completed furnace construction, and the rest of the coke ovens are progressing in an orderly manner. As the Indonesian coke project is gradually completed and put into operation, it is expected that profits will be further increased.

Leading high-quality steel company with strong profit resilience and high dividends

According to the 2023 profit distribution plan, the company plans to distribute a cash dividend of 2.5 yuan for every 10 shares to all shareholders in 2023, for a total cash dividend of 1.54 billion yuan, accounting for 72.52% of net profit due to mother in 2023, continuing the high dividend ratio. At the same time, the 2024-2026 shareholder return plan was announced. The total cash dividend to be distributed in each year was not less than 30% of the net profit returned to mother for that year, and the interim dividend was increased.

Risk warning: Downstream demand falls short of expectations, raw material prices fluctuate greatly, and production capacity release falls short of expectations.