Core views:
Valin Steel: A large state-owned enterprise with a 22-year steel production capacity of 25.28 million tons and accelerated transformation from “Premium Steel” to “Special Steel”. (1) Business division: Product structure upgrades drove the share of grade steel to 63% in '23, while plate, long timber and steel pipes accounted for 67%, 13%, and 10% of gross profit in '23, respectively.
(2) Strategic planning: Implement the three major changes of “quality, efficiency and power”, improve the “three strategic support systems”, and deepen integrated R&D innovation.
Product: High-end sheets and steel pipes are leading in strength, long materials have obvious location advantages, and structural upgrades enhance competitiveness. Comprehensive strength: The technical level is at the forefront, the trend of high-end development is obvious, and an effective incentive mechanism provides continuous momentum. (1) Plates: Leading the industry in high-end fields such as automotive plates, silicon steel, engineering steel, etc., and production expansion and upgrading consolidate comparative advantages. (2) Long materials: Enjoy location advantages and enjoy a clear premium in steel prices. Yangchun New Steel has obvious advantages at low cost, providing profit flexibility. (3) Steel pipes: It ranks second in domestic petroleum pipelines. High oil prices and energy security strategies support the continued boom in oil and gas pipeline demand.
Core competitiveness: continuous upgrading from long materials and premium steel to plate and special steel, sales, research and production+management changes support the best products, fastest delivery, and the best service. (1) Strategy: From long lumber to plate, from premium steel to special steel, the product structure continues to be upgraded, leading the industry in relative profitability. (2) Production: Lean production and management system to achieve quantity improvement, quality improvement and efficiency. (3) R&D: An integrated sales, research and production system based on integrated product development enhances R&D efficiency. (4) Marketing services: Intelligent “EVI+CTS” marketing integrates supply, production, research and marketing to enhance customer stickiness. (5) Management: Market-based remuneration, implementation of final elimination, comprehensive efficiency and cost reduction, and stimulation of enterprise vitality.
Profit forecast and investment advice: The company's 2024-2026 EPS is expected to be 0.80/0.81/0.89 yuan/share. Referring to comparable company valuations, we will give the company 10 times PE in 2024, with a corresponding reasonable value of 7.95 yuan/share, maintaining a “buy” rating.
Risk warning. Production of major products fell short of expectations. High-end products have fallen short of expectations in production volume.
Steel prices have dropped sharply. Prices of iron ore, coking coal, and coke have risen sharply.