Core views

The company announced the 2023 annual report and the first quarter report of 2024. The company's total revenue in 2023 was 344.868 billion yuan, -6.55% year-on-year, and net profit to mother was 11.944 billion yuan, -1.99% year-on-year. In the first quarter of 2024, the company reported total revenue of RMB 80.814 billion, +2.44% year-on-year, and net profit to mother was RMB 1,926 million, +4.4% year-on-year. The profit differentiation of hot and cold rolls has further accelerated. Cold rolling production accounts for 40% of the company's steel products, but gross profit accounts for 83%, which is the company's main source of profit for steel products. Meishan Steel turned a loss into a profit, reflecting the company's ability to control costs. Profits at several other bases were basically the same as last year. The combination of buyback and dividends reflects the company's ability to act as a high-quality central enterprise in market value management.

occurrences

The company publishes the 2023 Annual Report and the First Quarter 2024 Report.

In 2023, the company's total revenue was 344.868 billion yuan, -6.55% year-on-year, and net profit to mother was 11.944 billion yuan, -1.99% YoY. The basic EPS was 0.54 yuan, and the average ROE was 6.05%. In the first quarter of 2024, the company reported total revenue of 80.814 billion yuan, +2.44% year-on-year, net profit to mother of 1.926 billion yuan, +4.4% year-on-year. The basic EPS was 0.09 yuan, and the average ROE was 0.96%.

Brief review

The profit differentiation of hot and cold rolls is accelerating.

In terms of production and sales, the company produced 51.94 million tons (+2.09 million tons) and sold 51.9 million tons (+2.14 million tons). Among them, the biggest increase in production and sales came from cold-rolled coils, with cold-rolled production of 20.44 million tons (+770,000 tons) and sales of 20.51 million tons (+960,000 tons). In terms of profit, the company's gross profit per ton of steel products is 208 yuan, which is basically the same as last year, but the profit differentiation between different products is quite obvious. Among them, the gross profit per ton of cold-rolled coils was 436 yuan (+115 yuan), the gross profit per ton of hot-rolled coils was 61 yuan (year-on-year -39 yuan), the gross profit per ton of steel pipe products was 308 yuan (year-on-year +114 yuan), and the gross profit per ton of long-rolled products was 188 yuan (+30 yuan). The profit differentiation of hot and cold rolls has further accelerated. Cold rolling production accounts for 40% of the company's steel products, but gross profit accounts for 83%, which is the company's main source of profit for steel products.

Profits at the Baoshan and Zhanjiang bases increased, and the Meishan base turned losses into profits.

Looking at subsidiaries, Zhanjiang Steel's net profit was 1.85 billion yuan (+140 million yuan), Meishan Steel's net profit was 0.7 billion yuan (+4.7 billion yuan, turning a loss into a profit), WISCO achieved net profit of 1.03 billion yuan (-0.1 billion yuan), Baoshan Steel's net profit of 2.14 billion yuan (simulated investment income using parent company statements) (+1 billion yuan), and Baosteel Nippon Steel Auto Board's net profit of 410 million yuan (+170 million yuan). Meishan Steel turned a loss into a profit, reflecting the company's ability to control costs. Profits at several other bases were basically the same as last year.

Buyback and dividend combo punch, a model for high-quality central enterprises.

Since 2015, the company has maintained a dividend payment rate of more than 50% for 9 consecutive years. In 2015, the partial dividend at the end of the industry once reached 104%, and continuous high dividends have increased the investment value of the enterprise. The total estimated dividend amount of the company's 2023 annual report is 4.340 billion yuan, with an interim report of 2,441 billion yuan, with a total dividend payout of 6.78 billion yuan, a dividend payment ratio of 57% and a dividend rate of 4.3%. The company announced in Q4 last year that it plans to use no more than 3 billion yuan of its own capital to buy back the company's A shares at a price of no more than 8.86 yuan/share. The number of shares to be repurchased will not be less than 330 million shares and no more than 500 million shares, accounting for about 1.48%-2.25% of the company's total share capital before the repurchase.

At present, 342.0627 million shares have been repurchased, accounting for about 1.55% of the company's total share capital, and the total amount paid is 2.1 billion yuan. The combination of buyback and dividends reflects the company's ability to manage market value as a high-quality central enterprise.

Profit forecast and investment advice: Infrastructure started slowly in the first quarter, and superimposed real estate continued to decline, and the industry was hit hard. Since April, demand has resumed upward profits. Consumer goods trade-in and equipment upgrading policies within this year are expected to stimulate demand in the manufacturing industry, and the export industry has maintained a high growth rate. The industry's profit is expected to rise steadily. The company's net profit due to mother in 2024-2026 was 13.94 billion yuan, 15.95 billion yuan, and 18.02 billion yuan, respectively, maintaining the “increase in holdings” 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.