Core views:
The government work report sends a positive signal. Active fiscal policies continue. As the manufacturing PMI between China and the US improved markedly in March, the company's downstream industrial and infrastructure demand will be released. The company is firmly expanding production capacity to lead the market. At the end of 2023, production capacity reached 5 million tons, output reached 4.49 million tons, and capacity utilization rates rebounded. At the same time, it actively promoted intelligent manufacturing and informatization to reduce costs and increase efficiency. We are optimistic that in the context of improving downstream demand, the company will consolidate its leading position in the industry with scale and technical advantages.
summary
The PMI between China and the US rebounded in March, and downstream demand is expected to improve. The downstream demand for the company's products mainly comes from the industrial and infrastructure sectors. Prefabricated buildings receive strong policy support. Steel structure production and sales are expected to reach 140 million tons by 2025. Large-scale equipment upgrades will drive an increase in demand for steel structures. China's manufacturing PMI rose 1.7 percentage points to 50.8% in March, and the US PMI rose 2.5 percentage points to 50.3%. As the manufacturing PMI between China and the US improved markedly, demand for steel structure products is expected to improve.
The scale advantage is remarkable, and the expansion of production capacity protects sales. The company is determined to expand production capacity to consolidate its leading position in the industry. The market share reached 3.8% in 2022, ahead of other listed steel companies. In 2018-2023, the company's annual production capacity increased from more than 1.6 million tons to 5 million tons, annual output increased from 1.44 million tons to 4.49 million tons, and the capacity utilization rate rebounded to 90% in 2023. In the future, with new production capacity climbing and intelligent transformation, capacity utilization and market share are expected to rise further.
Firmly promote intelligent manufacturing and informatization to reduce costs and increase efficiency. The company attaches importance to the efficiency revolution brought about by intelligence and informatization. It uses a BIM platform to manage the entire order process, and introduces equipment such as laser cutting machines to improve production line efficiency. The company's annual per capita output increased from 130 tons in 2018 to 204 tons in 2023. In August 2023, the company introduced 1000 sets of welding robots on a large scale. In April of this year, it continued to bid for 2,000 robot water-cooled welding guns, further advancing the intelligent upgrade.
The purchase rating remains unchanged, and the target price is 25.53 yuan. We forecast the company's EPS for 2024-2026 to be 2.07/2.37/2.60 yuan respectively. The company was given a 2024 PE valuation of 12.3x, with a target price of 25.53 yuan, maintaining a “buy” rating.