This report is read as follows:
The company's steel production and sales remained high in the first three quarters of 2019, and its overall performance was sound. From the research and macro data show that the toughness of real estate is strong, automobile production and sales have picked up. With the high iron ore prices falling, the company's performance is expected to pick up gradually.
Main points of investment:
Maintain the "overweight" rating. The company's revenue in the first three quarters of 2019 was 35.889 billion yuan, down 0.89% from the same period last year; the net profit from its mother was 1.253 billion yuan, up 16.70% from the same period last year; the company's Q3 revenue was 13.122 billion yuan per quarter, down 0.37% from the same period last year; the company's net profit in the first three quarters was 0.31,7.39 and 484 million yuan respectively, with strong profitability and better-than-expected results. The company continued to reduce costs and increase efficiency, and the cost during the period was continuously optimized, raising the company's EPS in 2019-2021 to 0.27, 0.28, 0.29 yuan (previously 0.04, 0.05, 0.06 yuan), maintaining the company's target price of 2.37 yuan, and "overweight" rating.
Gross margin per ton of steel declined slightly compared with the previous quarter, and the results remained robust in the third quarter. In the first three quarters of 2019, the company's steel sales volume was 166,208 and 1.97 million tons respectively, the price per ton steel was 5826 yuan, 6309 yuan and 6673 yuan per ton respectively, and the cost per ton steel was 5263 yuan, 5433 yuan and 5953 yuan per ton respectively. The gross profit per ton steel was 563,876,720 yuan per ton respectively, the three fees per ton steel were 498,479,463 yuan per ton respectively, and the net profit per ton steel was 66,397,256 yuan per ton respectively.
The asset-liability ratio remained downward, and expenses continued to be optimized during the period. At the end of the third quarter of 2019, the company's asset-liability ratio was 68.17%, down 5.22 percentage points from 2018. The company's expense rate during the first three quarters of 2019 was 7.61%, down 0.61% from the whole of 2018, of which the financial expense rate was 1.71%, down 0.35% from the whole of 2018.
Steel demand remains strong and ore prices fall, and the company's performance is expected to pick up. Macro data show that real estate toughness is still there, superimposed infrastructure and cars gradually pick up, steel demand in the fourth quarter need not be pessimistic. The company is the leading steel enterprise in Gansu Province, with the first market share of steel products in the province, fully benefiting from the strong steel demand. At the same time, the company continues to promote cost reduction and efficiency, and the performance is expected to pick up gradually under the background of high mineral prices.
Risk hint: macroeconomic decline accelerated; supply-side rise exceeded expectations.