Net profit to mother in '23 was -40.98% year-on-year. The company that maintained the “increased holdings” rating achieved revenue of 113.8 billion yuan (yoy -3.71%) and net profit of 664 million yuan (yoy -40.98%) in '23. Considering the steel industry, we expect the company's EPS to be 0.10/0.12/0.15 yuan in 24-26 (previous value 0.20/0.23/- yuan) and 6.42/6.51/6.64 (previous value 6.36/6.61/-yuan), respectively. Comparable company PB (2024E) average is 0.63 times, giving the company a 24-year PB valuation of 0.63 times, corresponding to a target price of 4.04 yuan (previous value of 3.94 yuan), maintaining the “gain” rating.
Strategic and key products account for 69% of output, and high-end products account for a steady increase. According to the company's annual report, the company produced 23,1754 million tons of steel (yoy +4.51%) in 23 years, and the product structure was continuously improved. The electrical steel output was 1.695 million tons (yoy +14.2%), of which 1.108 million tons of oriented silicon steel and high-grade unoriented silicon steel were produced, accounting for 65% (yoy+2pct). The proportion of high-end products increased steadily; automobile board production was 4.025 million tons (yoy +12%), and the new product user structure was adjusted Breakthrough; the production of tinned (chrome) plates was 656,000 tons (yoy +6%), the output of energy drink products reached a record high, and overseas markets continued to expand. Overall, the company seizes growth opportunities in the automotive, wind power, photovoltaic and other industries and promotes product structure optimization and upgrading with efficiency as the center. The total output of the three strategic products and nine key products is 15.93 million tons, accounting for 69% (yoy+6pct).
The gross margin for '23 was -1.32pct year on year, and the cost ratio for the period was -0.3pct. According to the company's annual report, the company's comprehensive gross profit margin was 4.67% (yoy-1.32pct) in '23. Mainly because the year-on-year decline in steel prices was greater than that of raw materials, the steel industry is still under pressure. The cost rate for the period was 2.97% (yoy-0.3pct), of which the management cost ratio was 1.13% (yoy+0.05pct), the R&D cost ratio was 0.43% (yoy-0.1pct), and the financial cost ratio was 1.19% (yoy-0.28pct). In addition, the company enjoyed the value-added tax credit policy for advanced manufacturing enterprises, and the VAT input plus reduced revenue in '23 was about 358 million yuan. The company's net sales margin was 0.66% (yoy-0.62pct). In addition, the company plans to pay a dividend of 0.03 yuan (tax included) per share in 2023, accounting for 31% of net profit.
Positioning high-end panels, with outstanding innovation and green advantages, the company continues to promote the development of the three strategic products. In 23 years, the company launched 6 new products, including oriented electrical steel 15SQF1250, non-oriented electrical steel ESW1021, and high-strength automotive steel 980TBF, to help the development of wind power, photovoltaics, new energy vehicles and other industries; at the same time, it continues to promote 26 “alternative import” localization projects, forming a supply of 80,000 tons. In terms of green and low carbon, the company's carbon reduction at the source is progressing steadily, and special line experiments on low-carbon products are being carried out at the same time to improve low-carbon production capacity. We believe that as the company's higher capital expenses such as relocation of production capacity and environmental investment are basically completed, and at the same time, the company's product structure and remarkable green and low-carbon advantages are expected to gradually enter the harvest period, and we are optimistic about the company's development.
Risk warning: downstream demand falls short of expectations, production expansion progress falls short of expectations, and raw material prices fluctuate.