Items:
On October 30, the Company released the Report for the Third Quarter of 2023. In the first three quarters, the Company realized total operating income of RMB 120.272 billion yuan, with a year-on-year decrease of 3.66%; net profit attributable to parent company was RMB 4.105 billion yuan, with a year-on-year decrease of 20%; net profit attributable to parent company after deduction of non-profit was RMB 3.996 billion yuan, with a year-on-year decrease of 19.44%. In a single quarter, Q3 realized a total operating income of 40.715 billion yuan, with a year-on-year growth of 1.25% and a month-on-month growth of 2.66%; net profit attributable to parent was 1.537 billion yuan, with a year-on-year growth of 17.33% and a month-on-month decrease of 18.24%; net profit attributable to parent after deduction of non-profit was 1.508 billion yuan, with a year-on-year growth of 22.45% and a month-on-month decrease of 18.20%.
Comments:
The transformation and upgrading continued to advance, and the Company maintained stable profitability. In the first three quarters of 2023, the steel industry is still facing difficulties such as high raw fuel prices and insufficient downstream market demand. Under the background of changes in the industry structure, the Company accelerated its transformation and upgrading. Since the decline of industry boom in the second half of 2022, the Company's profit in a single quarter has remained stable as a whole. We believe that the stable profitability of the company benefits from the anti-cyclical fluctuation ability brought by the adjustment of the company's product structure, and the future performance is expected to remain stable.
The company's gross profit margin declined slightly. 23Q3, the company's total operating cost 38.678 billion yuan, month-on-month increase of 3.57%, higher than the operating income month-on-month growth rate (2.66%). 23Q3, the company's gross profit margin fell slightly by 0.25 percentage points to 10.94%, but the overall level remained at a good level.
The R & D expense rate has increased significantly. In 23Q3, the company's sales/management/financial expenses were RMB 94/4.91/18 million yuan respectively, accounting for 0.23%/1.21%/0.04% of 23Q3 revenue respectively, accounting for-0.06/+0.13/+0.11 percentage points respectively compared with 23Q2, and the overall three expense ratios increased slightly. R & D expenses increased month-on-month. In 23Q3, R & D expenses of the company were 1.748 billion yuan, up 11.91% month-on-month, accounting for 4.29% of revenue, up 0.35% month-on-month.
Disposal of old fixed assets, asset efficiency is expected to further improve. On October 30, the company issued the Announcement on the Disposal of Fixed Assets of Valin Liangang. The 4.3-meter coke oven of Valin Liangang Coking Plant has been shut down. A total of 53 equipment assets and 289 spare parts are idle and cannot be reused internally. The company plans to publicly list and dispose of the above idle assets on Hunan Province United Property Exchange Co., Ltd. on September 30,2023 as the base date. The listing price shall not be less than 90% of the appraisal value. If the disposal of old assets is finally completed, it will help to further activate the old idle assets and improve the efficiency of asset use.
Investment suggestion: The company's operation is stable, and the future is still optimistic about the steady improvement of the company's performance. The Company continued to promote the upgrading of variety structure. Under the condition that the industry faced a low boom, the transformation and upgrading of the Company continued to advance, making the Company have strong anti-cycle ability. We estimate that the company will realize operating income of 164.04/169.55/172.225 billion yuan from 2023 to 2025, net profit of 56.27/69.75/76.77 billion yuan from parent company, year-on-year change of-11.8%/24.0%/10.1%. As of the close of October 30, the price-earnings ratio of 2023-2025 will be 7/6/5 times respectively. Maintain the target price of 8.1 yuan, maintain the "strong push" rating.
Risk warning: material prices fluctuate significantly; macroeconomic fluctuations, projects under construction progress less than expected.