The readings of this report are as follows:
The company's results exceeded expectations in the first quarter of 2021. The adverse impact on the company has gradually faded, production and operation has gradually returned to stability, and we believe that its performance is expected to continue to grow. The company's acquisition of Luoyuan Minguang will help to enhance its core competitiveness.
Main points of investment:
Maintain the "overweight" rating. 2021Q1 achieved a net profit of 924 million, up 61.87% from the same period last year, and the company's performance exceeded expectations. Considering that the average steel price since 2021 has increased by about 31.87% over the same period last year, we forecast the company's operating income in 2021 at the price of 5150 yuan per ton of steel, raising the company's EPS to 1.89max 1.90 yuan in 2021-2022 (the original 1.15max 1.18 yuan), and the new 2023 EPS is forecast to be 1.91 yuan. Refer to similar companies, give the company 8 times the valuation of PE in 2021, raise the company's target price to 15.12 yuan (formerly 8.8 yuan), and maintain the "overweight" rating.
Production and operation have returned to stability, and performance is expected to continue to grow. With the 2020 epidemic and the adverse impact of the company's blast furnace overhaul on the company, the company's net sales profit rate in the first quarter of 21 was 6.38%, an increase of 1.02 percentage points over the same period in 2020. We believe that as the company's production and operation returns to stability, superimposing the growth of downstream steel demand and the rising trend of steel prices, the company's performance is expected to continue to grow.
The main iron and steel industry has been listed as a whole, and its core competitiveness has been continuously improved. In June 2020, the company acquired 100% stake in Luoyuan Minguang, which has a high degree of cooperation with the company in the main business. This acquisition is conducive to strengthening the company's main business of construction steel. In addition, after the H-beam project under construction in Luoyuan Min Steel reaches production, it is expected to increase the production capacity by 1.3 million tons, which will help to further enhance the company's core competitiveness.
Unremittingly tap the potential and increase efficiency, and effectively realize the crossing cycle. Under the background of carbon neutralization, the growth logic of the industry or company has been switched to the endogenous growth of individual "fine management to reduce costs". Through continuous tapping potential and increasing efficiency, in 20 years, Sanming headquarters, Quanzhou Minguang and Luoyuan Minguang respectively realized cost reduction of 21.02,24.99,0.79 yuan per ton in the whole process of per ton steel, with a total cost reduction of 210 million yuan. We believe that the company still has some room to reduce cost and increase efficiency in the future, and the cost per ton of steel is expected to be further reduced.
Risk hint: a sharp macroeconomic downturn, unpredictable safety accidents.