Introduction to this report:
The company's 2023 and 24Q1 results are in line with expectations. In 2023, against the backdrop of the industry downturn, the gross margin of the company's main steel business still increased month-on-month; vanadium prices stopped falling and rebounded, and profits in the company's vanadium chemical sector are expected to gradually recover.
Key points of investment:
Maintain an “Overweight” rating. The company's net profit for 2023 and 24Q1 was 10.84 million yuan and 159 million yuan, down 22.30% and 37.58% year-on-year, and the performance was in line with expectations. Considering that demand for steel is still weak and that vanadium prices are falling year on year, we lowered the 2024-2025 net profit forecast to be 1,199/1,310 billion yuan (originally 19.52/2.175 billion yuan), and added the 2026 net profit forecast to 1.410 billion yuan, corresponding EPS of 0.12/0.13/0.14 yuan. Referring to comparable companies, we gave the company a PB valuation of 0.53 times in 2024, maintained a target price of 3.02 yuan, and maintained an “gain” rating.
The product structure is continuously optimized. In 2023, the company's steel sales volume was 26.542 million tons, down 1.70% year on year. Among them, sales of key products increased 8.2% year on year, the qualification rate of products such as high-strength dual-phase steel and hydropower steel increased dramatically, and the company's steel product structure continued to be optimized.
In the context of the downturn in the industry, the gross margin of the company's main steel business continued to rise. The gross margin of the company's steel industry was 10.37% in 2023, up 0.88% year on year. Against the backdrop of the downturn in the steel industry, the company continued to optimize product structure, reduce costs and increase efficiency, and achieve increased profitability.
The price of vanadium products is gradually picking up, and profits in the company's vanadium chemical sector are expected to gradually recover. The company has a production capacity of 22,000 tons/year of vanadium products. The main products include vanadium pentoxide (tablets, powder), vanadium oxide, ferrovanadium nitride, vanadium aluminum alloy, etc., and has successfully developed a series of high-end vanadium and titanium products such as 99.9% energy grade vanadium oxide, vanadium battery electrolyte, metallic vanadium, and titanium alloy powder. According to Mysteel data, since April 2024, the price of vanadium pentoxide (flakes, 98%) in Sichuan has stopped falling and rebounded, rising from 7,400 yuan/ton on April 7 to 82,000 yuan/ton on May 11. With the gradual recovery of vanadium prices, profits in the company's vanadium chemical sector are expected to gradually recover.
Risk warning: Demand for steel has dropped sharply, and the price of vanadium has dropped sharply.