In the first three quarters of 2023, the company's operating income was 85.020 billion yuan, a decrease of 7.34%; net profit was 950 million yuan, a decrease of 47.95%. Among them, Q3 had quarterly revenue of 27.652 billion yuan, a decrease of 0.72%; net profit of net income was 540 million yuan, an increase of 2840.49%, an increase of 15.19%.
Production line efficiency reached a new high, and production of major products increased across the board. Steel production reached 17.89 million tons in the first three quarters of 2023, and achieved year-on-year growth despite being affected by maintenance. Among them, the company's three strategic products, electrical steel, automobile board, and tinned plate, achieved production of 1.25 million tons, 2.92 million tons, and about 500,000 tons, respectively, an increase of 17.6%, 9.3%, and 8% respectively. The total output of nine key products, including cold-rolled special steel and hot-rolled pickling board, was about 1.5 million tons, an increase of 3.6%. The average daily output and total coke consumption of Qiangang Company's No. 3 blast furnace reached an all-time high, and the monthly output hit the best level in history three times.
The product structure is continuously optimized, and the core products have excellent performance. In the first three quarters, the company's strategic+key products produced 11.65 million tons, accounting for 67% of the total output. In terms of electrical steel, high-end products account for 64%, and the sales volume of ultra-thin, high-magnetic-induction-oriented electrical steel below 0.2mm is the highest in the country, supplying products to 76 advanced overseas transformer companies; in terms of automotive boards, orders from OEMs account for 50%, the same increase of 4pct, and the supply volume of new energy users also increased 59%, significantly outperforming the growth rate of sales of new energy vehicles; in terms of tinned plates, orders for functional drinks and high-end products such as easy-to-open covers have increased steadily. The company supplies well-known Austrian functional drink manufacturers, with a supply share of 70%.
Expense rates declined during the period, and performance continued to improve month-on-month. The fee rate for the first three quarters of 2023 was 2.94%, down 0.21pct from the same period. Among them, the sales and management cost rates increased by 0.01 and 0.05 pct respectively; the R & D and financial cost rates decreased by 0.14 and 0.13 pct, respectively. The company's impairment losses totaled 399 million yuan, an increase of 249 million yuan over the previous year, mainly due to falling inventory prices and increased losses. Overall, the company achieved net profit of 950 million yuan, a decrease of 47.95%. Among them, Q3 achieved net profit of 540 million yuan, an increase of 2840.49% and an increase of 15.19% over the previous quarter. Performance improved for three consecutive quarters.
Operating cash flow deteriorated, and balance ratio declined. The company's 2023H1 revenue ratio was 0.5438, the same increase of 7.73 pct, mainly due to a decrease in revenue; the payout ratio was 0.4723, the same increase was 8.95 pct, mainly due to an increase in raw material costs. Overall, net operating cash inflow was 3.468 billion yuan, a year-on-year decrease of 1,775 billion yuan; net investment cash outflow was 187 million yuan, a year-on-year decrease of 1,168 billion yuan, mainly due to the transfer of its shares in Zhixin Electromagnetic by Beijing Shougang New Energy Materials Company. The company's balance ratio was 61.56%, down 3.47pct from the end of last year, mainly due to repayment of 2.5 billion corporate bonds.
Investment suggestions: Demand in the steel industry was weak in the first three quarters. The company actively optimized the product structure, increased investment in high-end products, and promoted cost reduction and efficiency. Net profit is estimated at 13.80, 16.41, and 1,843 billion yuan from 2023-2025, corresponding to PB 0.6, 0.6, and 0.6, maintaining the “highly recommended” rating.
Risk warning: the risk of steel price fluctuations, downstream demand recovery falling short of expectations, and product structure upgrading falling short of expectations.