The company's 19Q3 made a profit of 90 million yuan, an increase of 172% over the same period last year.
On October 25, 2019, the company released the three quarterly results of 2019: operating income of 1.02 billion yuan (YoY+31%) in the first three quarters of 2019, and net profit of 174 million yuan (YoY+136%) belonging to the shareholders of the parent company. 19Q3 realized operating income of 410 million yuan (YoY+26%,QoQ+29%) and net profit of 90 million yuan (YoY+172%,QoQ+64%) belonging to the shareholders of the parent company, which was higher than the previous forecast. Considering the pace of resuming production of the four major mines and the judgment of future demand, we maintain the judgment of Q4 ore price month-on-month callback, and the range of callback may be narrowed, so we raise the company's profit forecast. It is estimated that the EPS for 2019-21 will be 0.34,0.37,0.40 (the previous value is 0.29,0.37,0.45 yuan), and the "overweight" rating will be maintained.
The profit of 19Q3 Company has improved in an all-round way compared with the same period and month on month.
Mineral prices continued to be strong in the first three quarters of 2019. Iron ore Australian PB powder (excluding tax) was 637 yuan / ton (YoY+199 yuan / ton, + 45%), of which the average price of 19Q3 reached 711 yuan / ton (YoY+273 yuan / ton, + 62% 19Q3 54 yuan / ton, + 8%). The gross profit margins of 2019Q1-Q3 and Q3 companies are 28.2% (YoY+3.2pct) and 30.9% (YoY+3.7pct, QoQ+3.5pct), respectively, and the net profit margins are 17.1% (YoY+7.6pct) and 22.0% (YoY+11.6pct, QoQ+4.5pct), respectively. 19Q3, the expense rate during the company period is 6.6% (YoY-8.1pct, QoQ-0.8pct), which accounts for relatively high management expenses, and the Q3 management expense rate is 6.5% (YoY-4.3pct, QoQ-1.2pct).
The increase in cash payments is a drag on cash flow.
19Q3, the net operating cash flow of the company is 97 million yuan (YoY+105%, QoQ-45%), accounting for 24% of operating income (YoY+9pct, QoQ-32pct), mainly due to the increase in cash paid by the company for purchasing goods and receiving labor services. In the first three quarters of 2019, receivables and prepaid items accounted for 50.3% and 3.6% of operating income (YoY-17.5,-1.4pct), while payables and prepaid items accounted for 10.6% and 5.2% of operating costs (YoY-16.3,-3.3pct).
19Q4 ore prices month-on-month or pullback, steel mills replenish the warehouse in the short term or raise ore prices according to Vale SA's three-quarter report in 2019, Q3 Vale SA iron ore sales (including pellets) 85 million tons; we estimate that in order to achieve the target sales volume, Vale SA 19Q4 sales need to reach 96 million tons, more than 0.68 or 71 million tons of 19Q1 and 19Q2. Therefore, shipments in the fourth quarter or at a high level, superimposed overseas steel demand downward, Q4 ore price or pressure. In addition, according to the Mysteel,9 monthly sample, the average inventory of imported sinter in Benxi Steel Plant is 16.01 million tons, with annular and year-on-year average inventory of + 2.8% and-16.6% respectively. The average inventory of sinter in October so far is 15.13 million tons, which is still lower than that of the same period in previous years. Approaching the Spring Festival, if steel mills concentrate on replenishing stocks, mineral prices will rise in the short term or suddenly.
Still bullish on mineral prices in the next 2 years, maintaining the "overweight" rating
In the next 2 years, we are still bullish on the average price of iron ore, mainly because the iron ore energy is still in the contraction stage, while China, Southeast Asia and India have entered the long-process capacity expansion stage. As the correction of 19Q4 ore price may be narrowed, we raise the company's profit forecast. It is estimated that the company's BVPS in 2019-21 will be 4.37max 4.74xt 5.14 (the previous value 4.31xt 4.68px 5.13), corresponding to PB 1.25pm 1.15pm 1.06x, comparable company PB (2019E) 1.81times, considering that the company's iron ore reserves are far less than those of the four major mines, give the company 1.30-1.40x PB in 2019 The target price is 5.68-6.11 yuan, maintaining the "overweight" rating.
Risk tips: a larger correction in mineral prices; a sharp decline in demand; a decline in the production and sales of the company's products.