Event description
According to the annual report released by the company in 2016, the company achieved revenue of 35.094 billion yuan, net profit of 82 million yuan and basic earnings per share of 0.0132 yuan.
Event comment
[1] thanks to the recovery of the industry and the decline of the three expenses, the total profit of the company has increased significantly. The overall steel industry rebounded in 2016, and the profitability of the industry improved significantly. According to the China Iron and Steel Association, the total profits of large and medium-sized iron and steel enterprises changed from a loss of 84.7 billion yuan in 2015 to a profit of 30.378 billion yuan. Under the background of the recovery of the industry, the gross profit margin of the company's iron and steel products reached 31.68%, and the gross profit margin of coking, power, material trade and other items also increased compared with the same period last year. In addition, the three expenses also decreased significantly: sales expenses decreased by 31.57% compared with the same period last year, administrative expenses decreased by 24.32%, and financial expenses decreased by 11.33%. The increase and decrease in gross profit and expenses, coupled with 175 million yuan of subsidies received by the company in 2016, including the rewards and subsidies for the elimination of production capacity in Gansu Province, are included in the current profit and loss, bringing the company's total profit in 2016 to 672 million yuan.
[2] the surge in deferred income tax expenses greatly reduced the return net profit, and the performance was much lower than expected. Although the company realized a total profit of 672 million yuan, the income tax expenses reached 651 million yuan, accounting for 96.77% of the total profit. Of the income tax expenses, deferred income tax expenses reached 590 million, a year-on-year increase of nearly 24 times. As a result, the net profit of returning home is only 82 million yuan, which is much lower than expected.
[3] Belt and Road Initiative may bring an increase in demand, and the northwest leader is expected to benefit directly. The company is committed to building high-quality building materials and high-quality plate production bases in Northwest China. At present, it has formed three major iron and steel production bases: Jiayuguan headquarters, Lanzhou Yuzhong and Shanxi Yicheng. It has an annual production capacity of 9 million tons of iron, 1000 tons of steel and 1000 tons of materials. Belt and Road Initiative will bring demand increment. During the 13th five-year Plan period, Gansu Province plans to build 25 general airports and invest 700 billion yuan in transportation fixed assets. In addition, Xinjiang and Qinghai, which also belong to the Belt and Road Initiative economic belt, are also the main radiation places for the company's products, and the company is expected to directly benefit from its demand increment.
[4] Investment suggestion: it is estimated that the return net profit of the company from 2017 to 2019 is 7.49,8.96 and 1.333 billion yuan respectively, and the EPS is 0.12,0.14,0.21 yuan respectively, and the current stock price is 27.36XMagne 22.85X and 15.40X respectively.
[5] risk: downstream demand is lower than expected, and the landing progress of Belt and Road Initiative's investment is slow.
