Event
On August 27, the company announced its semi-annual report for 2020: the company achieved 9.804 billion yuan in revenue in the first half of 2020, an increase of 2.74 percent over the same period last year, and a net profit of 69 million yuan, a decrease of 44.03 percent over the same period last year.
The epidemic affects the rise of costs and the fall of steel prices.
In the first quarter of 20 years, the COVID-19 epidemic had a serious impact on the iron and steel industry. The company was affected by transportation, logistics and transportation, and the amount of raw materials into the plant was limited, and the overall production and operation in the first half of the year was greatly affected. At the same time, the high operation of steel inventory led to lower steel prices. In the first half of 20 years, the Myspic comprehensive steel price average index was 133.85, which decreased by 5.35% compared with the previous year. The pattern of "long strong plate weak" continued, the coil continued to hang upside down, and the price difference between hot and cold was low. The price of raw materials has been rising at a high level, and two-way extrusion has led to a contraction in the company's profits. In the past 20 years, H1, the company has produced a total of 2.6339 million tons of steel, down 4.19% from the same period last year; the company has achieved a cumulative operating income of 9.804 billion yuan, an increase of 2.74% over the same period last year; and net profit reached 69 million yuan, down 44.03% from the same period last year. After entering the second quarter, there has been a rapid growth in demand in Xinjiang, especially the demand for construction materials is improving, the resources of building materials in Xinjiang are tight, and the company has seized the opportunity to expand sales, with sales of 1.87 million tons in the second quarter, an increase of 410000 tons over the same period last year and an increase of 16.3% over the same period last year.
The advantage of the leading location in Xinjiang is obvious. Belt and Road Initiative Capital Construction driven growth Company takes Xinjiang as the core sales area and radiates the northwest and Central Asia regions at the same time. The products have high brand recognition in Xinjiang and Northwest China. In 2019, the company's market share of plate and building materials in Xinjiang reached 77% and 34% respectively. The company has obvious location advantages, with the help of Xinjiang railway construction, expansion, overall planning of road ratio, highway-rail ratio, continue to optimize logistics costs. The company has established a sales network all over Xinjiang, which can provide users with one-stop variety services, personalized customized services and steel deep processing services. On April 21, 2020, Baosteel Co., Ltd. and the actual controller Baowu and Huabao invested 1 billion yuan to establish Xinjiang Tianshan Iron and Steel Co., Ltd. Among them, eight Iron and Steel Company subscribed 500 million yuan in capital, with a shareholding ratio of 50%; China Baowu subscribed capital contribution of 250 million yuan, with a shareholding ratio of 25%; and Warburg Investment subscribed capital contribution of 250 million yuan, with a shareholding ratio of 25%. In 2020, there were a total of 390 key projects in Xinjiang, including 190 continued projects, 80 new projects and 120 preparatory projects. On May 17, 20, the CPC Central Committee and the State Council issued the "guiding opinions on promoting the Great Development of the Western region to form a New pattern in the New era," which specifically pointed out that we should take the joint construction of "Belt and Road Initiative" as the guide to increase the opening up of the western region. Support Xinjiang to speed up the construction of the core area of the Silk Road Economic Belt to form a westward transportation hub and a trade and logistics, culture, science and education, and medical service center. The company's future growth will continue to benefit from the western construction and usher in a strong driving force.
Investment suggestion
Due to the impact of the epidemic and the rise in raw material prices, the company's profit has declined, so we adjusted the company's 2020-2022EPS from 0.50max 0.56 shock 0.48 yuan per share to 0.29max 0.34 pound 0.40 yuan per share, maintaining the "buy" rating.
Risk tips: changes in macro policies, changes in policies for the development of the western region, and other uncontrollable risks in the company's operation.