Core views

The company announced its report for the first quarter of 2024. In the first quarter, the company achieved operating income of 16.872 billion yuan, -5.73% year over year; net profit to mother was 554 million yuan, +47.24% year over year. The sales price bucked the trend, and the product upgrade was obvious. The price of special steel long materials bucked the trend, showing that the company's products continue to be high-end, which is also one of the reasons for the sharp rise in the company's profits.

When production and sales decline, the company's gross profit does not decrease but rather increases. The increase in gross profit per ton brought about by high-end technology is quite obvious. Currently, all 4 coke ovens of Indonesia's Jinrui New Energy have been put into operation; Indonesia's Jinxiang New Energy 1 #、2 #焦炉均已投运，3 #焦炉完成砌炉，正在烘炉中，后期焦炭价格恢复，焦炭项目顺利投产将贡献业绩增量。 The company made it clear that the amount of cash dividends for the first half of 2024 will not be less than 30% of net profit due to mother for the half year, and that the proportion of the 2023 cash dividend will not exceed the proportion of net profit due to mother for the current year to actively give back to investors.

occurrences

The company published its report for the first quarter of 2024.

In the first quarter, the company achieved operating income of 16.872 billion yuan, -5.73% year on year; net profit attributable to shareholders of listed companies was 554 million yuan, +47.24% year over year. As of March 31, 2024, the company's total assets were 73.256 billion yuan, +0.11% over the end of the previous year; owners' equity attributable to shareholders of listed companies was 26.679 billion yuan, +0.51% over the end of the previous year.

Brief review

The selling price bucked the trend, and the product upgrade was obvious.

The company's overall average sales price in the first quarter was 4,481 yuan/ton (+2.27% year over year), better than the same period in the industry (China Steel Association CSPI steel price index -6.29% year on year).

Among them, alloy steel bars are 4,491 yuan/ton (year on year +290 yuan/ton), alloy steel wire is 4,794 yuan/ton (year on year +274 yuan), alloy steel strip is 3,869 yuan/ton (year on year + +4 yuan/ton), medium and heavy plate is 4,836 yuan/ton (year on year +83 yuan/ton), and rebar steel is 3,440 yuan/ton (year on year - 318 yuan/ton). The price of special steel long materials bucked the trend, showing that the company's products continue to be high-end, which is also one of the reasons for the sharp rise in the company's profits.

Production was actively reduced, and gross profit increased.

The company sold 2.2641 million tons of steel during the reporting period (YoY - 270,000 tons, month-on-month - 320,000 tons). Demand for building materials deviated in the first quarter, and the company took the initiative to reduce production and sales. The company's gross profit during the reporting period was 1,737 billion yuan (YoY +53 million yuan, month-on-month +37 million yuan), with a gross profit margin of 10.3% (+0.9% YoY, -0.2% month-on-month). When production and sales decline, the company's gross profit does not decrease but rather increases. The increase in gross profit per ton brought about by high-end technology is quite obvious.

Indonesia's coke project is progressing steadily.

During the reporting period, Indonesia's Jinrui New Energy sold 4612,000 tons of coke, achieving operating income of 1,358 billion yuan and net profit of 17.9014 million yuan. Coking coal prices were high in the first quarter, while coke prices declined due to low demand, and the contribution of coke projects to profit growth was weak. Currently, all 4 coke ovens of Indonesia's Jinrui New Energy have been put into operation; Indonesia's Jinxiang New Energy 1 #、2 #焦炉均已投运，3 #焦炉完成砌炉，正在烘炉中，后期焦炭价格恢复，焦炭项目顺利投产将贡献业绩增量。

Non-recurring profit and loss supplement operating profit.

The company's non-recurring profit and loss during the reporting period was $126 million. The company is an advanced manufacturing enterprise. The advanced manufacturing value-added tax credit policy provides the company with partial tax relief and includes other income. In addition, the company's transactional financial assets also achieved good returns in the first quarter, taking into account gains and losses from changes in fair value. Non-recurring profits and losses complement the company's profits.

Once again, it was clarified that “continuous cash dividends are paid, and investor returns are valued”.

The company issued the “2024 “Improve Quality, Efficiency, and Heavy Return” Action Plan, which once again clarifies the dividend conditions and upper and lower limits for mid-2024. The amount of cash dividends for the first half of 2024 is not less than 30% of the net profit attributable to shareholders of listed companies in the consolidated semi-annual statement, and the proportion does not exceed the proportion of the 2023 cash dividend to the net profit attributable to shareholders of the listed company in the current year. The company paid 1,541 billion yuan in 2023. Based on current stock prices, the dividend ratio is still as high as 4.8%. The company has a high historical dividend and actively gives back to investors.

Profit forecast and investment advice: The company's net profit for 2024-2026 is expected to be 2.5 billion, 3.03 billion, and 3.52 billion, respectively. The continued promotion of the company's high-end development will be the core highlight of profit growth. Maintain an “Overweight” rating.

Risk analysis: Currently being dragged down by real estate demand, the steel market is showing a trend of “reduced supply, weak demand, rising inventory, falling prices, declining revenue, and declining profits”, and enterprise production and operation are facing major challenges. Along with the continuous outbreak of local wars, the uncertainty of the international situation, exchange rate fluctuations, and repeated trade frictions have had a certain impact on steel industry exports. Relevant laws such as the new Environmental Protection Law and new pollutant emission standards have been advanced in depth. Environmental protection supervision and standards for enterprises have been strengthened, supervision and enforcement have become more strict, public awareness of environmental protection has increased, and environmental requirements for companies have further increased. The steel industry is facing greater environmental pressure.