"fight for steel! Li Pengfei, an analyst at Guotai Junan Iron and Steel Industry, said in a recent conference call that "since the beginning of the year, I have bet on all my reputation and achievements, and have comprehensively turned to recommending the year-round opportunity of Pu Steel." "

Some market participants told Chinese reporters that cyclical factors still occupy a greater influence in the current round of iron and steel market, the performance of the iron and steel industry is still likely to fluctuate greatly, and the investment logic should still proceed from a cyclical point of view.

The performance of iron and steel stocks broke out.

Since October last year, steel prices have continued to rise, with rebar prices as an example. In the futures market, the main contract of the Shanghai Stock Exchange continued to rise from 3600 yuan / ton to 5000 yuan / ton as of the close of trading on April 9.

Data from Lange Iron and Steel show that all varieties of steel market have achieved a large increase, hot-rolled coil, cold-rolled coil prices are above the 2011 high, three-grade rebar prices are close to the high of the year.

Driven by a sharp rise in steel prices, the profits of iron and steel enterprises have improved significantly.

On the evening of April 8, Chongqing Iron and Steel announced a pre-increase in the first quarter of 2021. According to the announcement, according to preliminary estimates by the financial department, the company expects that the net profit attributed to shareholders of listed companies in the first quarter of 2021 will increase by about 1.08 billion yuan compared with the same period last year (statutory disclosure data), an increase of about 25880.66% over the same period last year. It is estimated that the net profit after deducting non-recurring gains and losses belonging to shareholders of listed companies in the first quarter of 2021 will increase by about 1.066 billion yuan compared with the same period last year (statutory disclosure data), an increase of about 421343.87% compared with the same period last year.

In the first quarter of last year, the net profit of Chongqing Iron and Steel belonging to shareholders of listed companies was 4.173 million yuan, and the net profit of shareholders of listed companies after deducting non-recurrent gains and losses was 253000 yuan.

With regard to the reasons for the surge in net profit, Chongqing Iron and Steel said that since 2020, the company has implemented a series of technological transformation projects to further optimize product structure, enhance product market competitiveness, increase production and capacity across the line, and make every effort to improve quality and efficiency. In the first quarter of 2021, the company seized the favorable opportunity of the recovery of the iron and steel market, comprehensively matched the standard to find the difference, paid close attention to reducing the cost and increasing efficiency, realized the steady improvement of production and marketing economies of scale, continued to improve production and operation, and achieved a substantial increase in net profit belonging to shareholders of listed companies compared with the same period last year.

On the evening of April 9, Taigang stainless Steel announced that the company expects to achieve a net profit of 1.6 billion yuan to 2.1 billion yuan belonging to shareholders of listed companies in the first quarter of 2021, an increase of 971.17% and 1305.90% over the same period last year. The company said that in the first quarter of 2021, due to the impact of macroeconomic recovery, the demand for downstream industries of iron and steel products increased, while the rise in raw material prices pushed up steel prices, and the company seized the opportunity to vigorously improve the production efficiency of ironmaking, steelmaking and rolling, while actively promoting the production of differentiated products, constantly optimizing the product structure, continuously improving the competitiveness of products, and significantly increasing business performance compared with the same period last year. At the same time, the company released its annual results of KuaiBao, the company achieved a net profit of 1.735 billion yuan, a decrease of 18.11% over the same period last year.

As share prices soar, analysts are bullish on "betting on all reputations"

Steel stocks, which have been depressed for years, fought a beautiful "turnaround" this year. Chongqing Iron and Steel shares rose by the limit on April 9, spurred by news of a big increase in performance.

The steel sector as a whole has risen significantly so far this year. The wind steel industry points out that it has risen from about 2000 points at the beginning of the year to the latest 2575.91 points, an increase of nearly 30 per cent.

Steel industry analysts have also hardened their backs.

"fight for steel! Li Pengfei, an analyst at Guotai Junan Iron and Steel Industry, said in a recent conference call that "since the beginning of the year, I have bet on all my reputation and achievements, and have comprehensively turned to recommending the year-round opportunity of Pu Steel." "

Li Pengfei previously said in a research report that carbon neutralization is not a thematic investment, but confirms the end of the steel industry's capacity expansion cycle and production growth over the past two decades. Looking forward to the next decade, the present is the starting point of the new prosperity of the iron and steel industry.

He believes that the new prosperity of the steel industry will show the following characteristics:

With the deepening of urbanization and the continued development of the manufacturing industry, steel demand will still grow at an annual growth rate of 2%, the industry will usher in a long-term mismatch between supply and demand, steel prices will end with large fluctuations, and steel prices are easy to rise and difficult to fall in the future.

With the acceleration of merger and reorganization, the leading advantage of the industry is more obvious. State-owned and private enterprises began to pursue capacity expansion under the stock capacity, the industry concentration increased rapidly, and the bargaining power of leading enterprises increased rapidly. Industry leaders will eventually reduce costs through continuous optimization of management, reform of incentive mechanisms, and improvement of efficiency, while science and technology will continue to empower manufacturing, while environmental protection and green development will open the cost gap between leading companies and other enterprises. the leader will produce excess benefits. And with the end of the production cycle, the asset-heavy development model of capacity expansion is no longer, in the future, the industry asset-liability ratio decreases, dividends rise, and the industry gradually changes to light assets.

With the rapid development of electric furnace and the increase in the proportion of electric furnace steel, due to the flexible opening of electric furnace, the fluctuation of supply side matches the demand, and the price volatility decreases. With the continuous development of Youtegang, the valuation has switched from periodic products to growth logic. The industry's medium-and long-term profit center has been revised up, and ROE has risen.

Li Pengfei believes that the policy of reducing crude steel production is likely to be strictly implemented, and the industry may usher in a gap between supply and demand. According to the China Iron and Steel Association, from January to February 2021, the country produced a total of about 170 million tons of crude steel, a significant increase compared with the same period in 2020. Assuming that crude steel output in 2021 is the same as the same period last year, crude steel production from March to December in 21 years will decline compared with the same period last year. Under the background of global recovery, US steel prices have risen sharply, domestic steel demand is good, and there will be a gap between supply and demand in the steel industry.

"be optimistic about the great opportunities in the iron and steel sector. We believe that under the background of carbon neutralization, there may be a gap between supply and demand in the iron and steel industry in 2021. In the long run, the 20-year production capacity expansion cycle of the industry is basically over, the iron and steel industry is standing at the starting point of new prosperity, the plate ushered in important investment opportunities. "said Li Pengfei.

Cyclical factors can not be ignored

Many market participants are optimistic about the steel stock market, but some market participants also believe that cyclical factors still have a greater influence in the current round of iron and steel market, and the performance of the iron and steel industry still has the possibility of large fluctuations. Investment logic should still be from a cyclical point of view.

"the improvement of the industry management pattern brought about by advantages such as supply-side reform is still in its infancy. "the rise in steel prices is still dominated by cyclical factors, and the ability of steel companies to raise prices is not enough to support the improvement of the overall profit margins of the industry," a Shanghai-based brokerage investment research life told Chinese reporters at a brokerage in Shanghai. Therefore, it is still from a cyclical point of view to look at the current performance improvement of steel stocks. "

Yang Wu, an analyst of the steel industry of Soochow Securities, also said in an interview with a Chinese reporter from a brokerage that cyclical factors are the main driving force for the improvement of the performance of the iron and steel industry, and that the improvement of the operating environment brought about by "supply-side reform" accounts for relatively little to the performance of the iron and steel industry.

In fact, some market analysts also expressed concern about the sustainability of current steel prices. The latest analysis of Lange Iron and Steel pointed out that the global economic resonance recovery, steel demand will still be in good condition in the short term, while on the supply side, the two ministries carried out capacity reduction, Tangshan production restrictions continued, the country's major iron and steel enterprises blast furnace operating rate is lower than the same period last year, limited supply and demand rebounded, iron and steel enterprises restructuring accelerated, steel supply and demand pattern is expected to remain good.

However, recently, steel prices have repeatedly set new highs, and the downstream cost pressure is increasing. The year-on-year and month-on-month increases in PPI in March were significantly larger than those in the previous month, and the Financial Committee meeting on April 8 stressed the need to maintain price stability, paying special attention to commodity price trends. The current market high risk is further intensified, the steel market trading volume and prices have obvious signs of weakening in the latter two days of this week, and may face high adjustment next week.

However, Yang is still optimistic about the performance of steel stocks for the whole year. He said that the current steel prices only stay in the supply and demand improvement stage, the follow-up will transition to the cost profit stage, steel prices will remain high throughout the year.

"next year, driven by carbon neutrality, steel stocks will usher in further valuation increases. "Yang said.