21H1's net profit increased by 132% compared with the same period last year, maintaining the "overweight" rating. On August 17, the company released a semi-annual report with 21H1 revenue of 31.08 billion yuan (yoy+36%) and home net profit of 2.73 billion yuan (yoy+132%), which was in line with the 2.73 billion yuan of the performance forecast (2021-034). 21Q2 revenue of 16.56 billion yuan (yoy+35%, qoq+14%), home net profit of 1.81 billion yuan (yoy+199%, qoq+95%). The company is the iron and steel leader in Fujian, enjoying the advantage of steel premium brought by location and the advantage of low transportation cost of raw material import, we are optimistic about the development of the company. Taking into account the 21-year steel production restriction policy, supply-side or promote steel prices to rise, we adjust the profit forecast. It is estimated that the company's EPS for 21-23 years will be 1.84pm 2.03pm 2.11 yuan (the previous value 1.50pm 1.66pm 1.83 yuan), and the average PE (2021E) of the comparable company is 5.05X. Considering the location advantage of the company, the company is 5.4x PE (2021E) and the target price is 9.94 yuan (the previous value is 10.02 yuan). Maintain the "overweight" rating.
Steel gross margin of 21H1 Company increased by 398 yuan / ton compared with the same period last year.
In the first half of 21, the company produced 6.13 million tons of crude steel (yoy+7%), 51.8% of the annual plan, and 5.61 million tons of steel output (yoy-1%), completing 48.1% of the annual plan. The average steel price of 21H1 Company is 5537 yuan / ton (yoy+37.2%), the gross profit per ton is 842 yuan / ton (yoy+398 yuan / ton), and the gross profit margin of steel business is 16.07% (yoy+3.84pct). Among them, the gross profit margin of smooth round steel and glossy steel bar products increased by 11.31pct and 11.72pct respectively compared with the same period last year. In the good market environment in the first half of the year, the company strives to promote transformation and upgrading, ultra-low emission transformation and optimization of the company's organizational structure to maintain a good development trend.
The company has achieved remarkable results in expense management, with a year-on-year decrease in the expense rate of 0.35pct21H1, a gross profit margin of 15.21% (yoy+4.2pct) and an expense rate of 3.48% (yoy-0.35pct), of which the management expense rate is 0.95% (yoy-0.3pct), which is much lower than the same period last year, mainly due to the expansion of revenue while the management expenses remain relatively stable; the net profit margin of 21H1 sales is 8.78% (yoy+3.65pct). 21H1, the company's net operating cash flow was-740 million yuan, which turned negative compared with the same period last year, mainly due to the rapid rise in raw material prices and the increase in bills receivable compared with the same period last year.
The leading position of the region will remain unchanged, and the rating of "increasing holdings" will be maintained.
The company is the iron and steel leader in Fujian. After 20 years of merging with Luoyuan Minguang, the leading position of the industry in the province has been further consolidated, or it can fully enjoy the advantage of steel premium and the low transportation cost of raw material import brought by the location. We estimate that the EPS of the company in 21-23 is 1.84 PE 2.03, 2.11 yuan, and the average value of PE (2021E) of the comparable company is 5.05X. Considering the location advantage of the company, the company chooses 5.4x PE (2021E), the target price is 9.94 yuan, and maintains the "overweight" rating.
Risk hint: macroeconomic growth is lower than expected, iron ore prices rose more than expected.