The homing net profit of 20Q2 is the same as / month-on-month, respectively-18% RMB450,000,000.
The company's 20H1 realized operating income of 9.8 billion yuan (yoy+3%) and net profit of 70 million yuan (yoy-44%). 20Q2 realized operating income of 6.63 billion yuan (yoy+18%,qoq+109%) and net profit of 260 million yuan (yoy-18%,qoq+4.5 billion yuan). Q2 significantly turned losses into profits, mainly due to seasonal reasons and improved demand in Xinjiang. Considering that the supply and demand in Xinjiang is good, and the epidemic situation has been well controlled, we estimate that the EPS 0.10 pound 0.11 pound 0.12 yuan in 20-22 years, maintaining the "overweight" rating.
20H1 production and sales are booming, gross profit margin is slightly downward.
The steel production and sales volume of 20H1 Company are 271 and 2.77 million tons (yoy+3%/+9%) respectively, of which the production of building materials and plate materials are 114,1.57 million tons (yoy+3%/+2%) and the sales volume are 117,117,1.6 million tons respectively (yoy+10%/8%). The product sales volume of Q2 Company is 1.88 million tons, which is + 28% compared with the same period last year, and the sales volume of building materials is + 43% over the same period last year, mainly due to the increase in demand for building materials in Xinjiang in the same period. In addition, the average prices of building materials and plates of 20H1 Company are 3341 yuan / ton and 3471 yuan / ton respectively (yoy-9%,-4%). In the same period, the average prices of threads and plates in Urumqi are-9% and-7% respectively compared with the same period last year. The price performance of the company's products is relatively good; the gross profit margin of 20H1 Company is 7.8% (yoy-1.3pct), mainly due to the decline in steel prices.
20H1 expense rate went down slightly, Q2 cash flow improved significantly
The expense rate and return net interest rate of 20H1 during the period are 6.8% and 0.7% (yoy-0.8/-0.6pct) respectively, in which the rates of sales, management, R & D and financial expenses change little from the same period last year, and the absolute values of expenses are + 0.2%,-40%,-96% and + 1% respectively compared with the same period last year. Management and R & D expenses dropped more because the logistics service fee was reduced to 0 yuan and the investment of Q1 new products was reduced to 0 yuan. In addition, the net operating cash flow of 20H1 was 680 million yuan, compared with-370 million yuan in the same period last year, mainly due to the company's increase in bill payments, and notes payable at the end of H1 increased by 1.1 billion yuan compared with the same period last year.
Production capacity or integration, solid investment is strong, supply and demand in Xinjiang is good.
On May 17, the CPC Central Committee and the State Council issued the guiding opinions on promoting the large-scale Development of the Western region to form a New pattern in the New era. Among them, "strengthening the planning and construction of infrastructure" and "strengthening the construction of open channels" are all related to infrastructure investment in the western region, including Xinjiang. According to Wind,2020, investment in fixed assets and itemized investment in construction projects in Xinjiang in July were 18.2% and 28.0% respectively compared with the same month last year, which were significantly better than the national average (- 1.6%,-2.3%, 8.3%, 5.2%).
The company is the leading steel enterprise in Xinjiang, and the completion of capacity integration in Xinjiang is one of the strategic tasks of the controlling shareholder Baosteel Company in 2020. If the integration is carried out smoothly, the supply and demand pattern in Xinjiang is expected to improve, and the company is expected to benefit.
The company's profit or improvement, maintain the "overweight" rating
As of August 26, there have been no new cases in Xinjiang for 10 consecutive days, the epidemic situation has been well controlled, and the supply and demand in Xinjiang may be improved, and the company is expected to benefit. We maintain our profit forecast. We estimate that the company's BVPS2.80/2.91/3.03 for 20-21 years will be 1.24 times that of PB 1.35pm, which is comparable to the company's average PB (2020E). Considering that the company is the leader of iron and steel in Xinjiang and the demand for steel used in Xinjiang is good, the company will be given 1.40 times PB in 2020 with a target price of 3.92 yuan (the previous value is 3.36-3.50 yuan) to maintain the "overweight" rating.
Risk tips: the company's production and marketing is not as expected; downstream demand is sharply downward; Xinjiang epidemic situation is repeated.