Main points of investment
Performance summary: the company issued a quarterly earnings forecast announcement. It is expected that the company's operating results in the first quarter of 2017 will turn into profits. The net profit attributed to the shareholders of the listed company is about 224 million yuan, equivalent to EPS about 0.04 yuan. In the same period last year, the net profit was-266 million yuan, equivalent to EPS-0.058 yuan.
High profit operation of the industry in the first quarter: with the gradual return of downstream demand after the Spring Festival, coupled with the shutdown of the intermediate frequency furnace, steel prices rose sharply, and the gross margin of the industry per ton of steel returned to an all-time high in the first quarter. Gross margin per ton of construction steel even runs at the high level of 600-800 yuan. As an important iron and steel production group in the northwest region, excluding material trade, the company is involved in the fields of stainless steel, coiled plate and construction steel, with product income accounting for 41%, 31% and 23% respectively. Strong industry profits have laid a solid foundation for the company's performance growth.
Full-year earnings are expected to maintain a strong range: although steel prices have fallen sharply recently, the rapid decline in social inventory in the context of the recovery of production means that the actual demand is still relatively strong, and the reason is more from the inventory adjustment of the industrial chain. this is contrary to the principle of rising steel prices in the early winter. The restocking of the whole economy since December has led to a price dislocation, and the off-season and peak season is the main feature of the steel market so far this year. Considering that demand is still there in the past two months, steel prices are likely to rebound after destocking. However, the impact of the central bank's participation in real estate regulation and control goes beyond the 930 regulation and control changes, and the demand increment in the second half of the year may face attenuation, which needs to be paid attention to in the later stage. Due to the sufficient adjustment of the supply side of industrial enterprises over the years, it is expected that the profits of industrial enterprises as a whole can still maintain a high level, but the month-on-month ratio has converged.
Investment suggestion: as the leader of steel production enterprises in Gansu Province, the company has obvious advantages in the vast inland areas such as northwest Xinjiang. Under the background of the basic orientation of the industry, with the continuous development of infrastructure investment in Xinjiang and the promotion of the "Belt and Road Initiative" strategy, the company's profits are expected to continue to be strong. Its EPS is expected to be 0.11,0.13 and 0.15 yuan respectively from 2017 to 2019, maintaining the "overweight" rating.
Risk hints: inflation and interest rates are rising too fast, and infrastructure investment in Xinjiang is not up to expectations.
