Net profit to mother in '23 was -1.99% year-on-year. The company that maintained the “buy” rating achieved revenue of 344.9 billion yuan (yoy -6.55%) and net profit to mother of 11.9 billion yuan (yoy -1.99%) in '23. Considering that there has been no significant recovery in the steel industry, we expect the company's EPS to be 0.57/0.64/0.68 yuan in 24-26 (previous value 0.66/0.76/- yuan), respectively. The company is expected to benefit from the competitive potential and stable leading position brought by the technical advantages of the product. We maintain a “buy” rating. The target price is 7.86 yuan (previous value: 7.78 yuan), corresponding to 0.83 x 2024-25E average BVPS of 9.48 yuan, which is consistent with the company's historical level since 2017.
The share of “1+1+N” products continued to increase, supporting the profitability of tons of steel to maintain resilience. In 23 years, the company achieved steel sales of 51.9 million tons (yoy +4.3%), with an average sales price of 4,841 yuan/ton (yoy -9.1%). Among them, the company's “1+1+N” products sold 27.92 million tons (yoy +10%), accounting for 53.8%. Cold-rolled automobile plates and oriented silicon steel products continued to maintain a high market share. The company's steel manufacturing sector has a gross profit margin of 3.9% (yoy+0.5pct) and a gross profit of 208 yuan/ton (yoy+5 yuan/ton) per ton of steel. It remains resilient under the severe business pattern of the steel industry, and the profit per ton of steel enters 95% of the industry. In addition, the company's export sales volume in '23 was 5.837 million tons (yoy +46.6%), and the export order volume reached a record high. The gross export profit margin was 10.2%, better than the domestic 5.6%.
The cost reduction exceeded the annual target, and the operating performance maintained accurate benchmarking, horizontal comparison, and collaborative exploration of the company's multiple bases in the 23rd year. It achieved cost reduction of 5.01 billion yuan and exceeded the annual target of 3.95 billion yuan, strongly supporting operating performance by focusing on energy efficiency improvement, logistics cost reduction, economical furnace materials, and cash payments. The company's financial expenses were -35.7% year-on-year in '23, mainly due to a decrease in average financing size and financing interest rates. At the same time, the company continued to increase R&D investment, with an R&D investment rate of 5.68% (yoy+0.99pct). The company maintained the highest performance in the domestic industry with an expense ratio of 3.04% (yoy+0.09pct) and a net interest rate of 3.99% (yoy+0.18pct) during the period.
Continuously enhance investor returns, 23-year dividend rate of 56.77%
According to the company's profit distribution plan, the company plans to distribute cash dividends of 4.34 billion yuan (tax included) to all shareholders for the second half of 2023, accounting for 58.72% of 23H2's net profit. Combined with a total dividend of 2.44 billion yuan for half a year, the company's total cumulative cash dividend for 2023 is 6.78 billion yuan, accounting for 56.77% of net profit due to mother in 2023. In addition, the company launched a share repurchase plan of no more than 3 billion yuan in October '23. By the end of March '24, it had repurchased a total of 342 million shares, with a total payment amount of 2,089 million yuan.
Continuously enhance investor returns.
Risk warning: Prices of raw materials have fluctuated greatly, downstream demand has fallen short of expectations, and industry competition has intensified.