This report is read as follows:
The company's performance in 2018 is in line with expectations, the gross profit per ton of steel remains high, the net profit per ton of steel reaches an all-time high, and the company's profitability continues to improve. It is expected that the demand for steel downstream is weak in 2019, and the company's profits may fall somewhat.
Main points of investment:
Maintain the "overweight" rating. The company's annual operating income in 2018 was 33.177 billion yuan, up 23% from the same period last year, and the net profit was 1.857 billion yuan, up 15.99% from the same period last year. The company's performance was in line with expectations. The company's revenue in the fourth quarter was 7.481 billion yuan, up 7.41 percent from the same period last year. The net profit in the fourth quarter was 284 million yuan, down 54.5 percent from the same period last year, and 48.93 percent from the previous quarter. Considering the weak downstream demand, the company's 2019 EPS in 2020 is 0.74max 0.83 yuan (the original 0.96max 1.06 yuan), and the new 2021 EPS is predicted to be 0.86 yuan. The company's profitability continues to improve, maintaining the company's target price of 4.35 yuan and maintaining the "overweight" rating.
In 2018, gross profit per ton of steel remained high, and net profit per ton of steel reached an all-time high. The company's steel sales in the fourth quarter of 2018 were 161,237,240 and 1.83 million tons respectively, and the level of sales in each quarter was higher than that in 2017. In 2018, the average steel sales price of the company was 4038 yuan / ton, the gross profit per ton of steel was 510 yuan / ton, and the net profit per ton of steel was 226yuan / ton. the net profit per ton of steel increased by 11 yuan / ton compared with 2017, a record high. We expect the downstream steel demand to fall slightly in 2019, and the company's profits may fall slightly.
The company's balance sheet was further optimized and financial expenses fell sharply. In 2018, the company's asset-liability ratio fell 5.16 percent to 74.47 percent compared with the same period last year; financial expenses decreased 12.44 percent to 866 million yuan compared with the same period last year, continuing the downward trend. We expect that as the company's profitability continues to strengthen, the company's financial expenses will continue to decline in 2019.
New construction in spring exceeded expectations, and regional steel enterprises fully benefited from high steel prices. The start of construction in the spring of 2019 has exceeded market expectations, and the company, as the leader of Henan steel enterprises, has fully benefited from the high profits brought by high steel prices. With the continuous optimization of the balance sheet, the company's 2019 performance is still supported.
Risk hint: macroeconomic decline accelerated; supply-side rise exceeded expectations.