The company's revenue for the first three quarters of 2024 was 242.856 billion yuan, down 4.77%; net profit to mother was 5.882 billion yuan, down 29.56%; 24Q3 revenue was 79.605 billion yuan, down 6.53%, 3.44%; net profit to mother was 1.338 billion yuan, down 64.77%, or 48.92%.

Sales of key products increased rapidly, and the share of exports reached a record high. In the first three quarters of 2024, the company achieved 36.676 million tons of iron production, a decrease of 0.95%; steel production was 39.611 million tons, a decrease of 0.51%. Sales of commercial billets were 38.504 million tons, a decrease of 1.19%; sales of steel were 38.5 million tons, a decrease of 1.21%. Among them, iron production in the third quarter was 12.558 million tons, a decrease of 1.54%; steel production was 13.304 million tons, a decrease of 4.10%; and commercial billet sales were 12.991 million tons, a decrease of 3.09%. In the first three quarters of 2024, the company's “1+1+N” products achieved sales volume of 22.55 million tons, an increase of 10.97%. Among them, sales of oriented silicon steel increased 27.5% year on year. In addition, the company vigorously explores overseas markets. In the first three quarters, 4.66 million tons of export contracts were signed, an increase of 2.64%, accounting for a record high of export sales.

The downturn in the market dragged down revenue, and gross margin declined. The company achieved revenue of 242.856 billion yuan in the first three quarters, a year-on-year decrease of 4.77%, mainly due to falling demand in the steel market. Among them, the total revenue from steel manufacturing was 189.647 billion yuan, a decrease of 6.5%. The company's average steel price in the first three quarters was 4,573 yuan/ton, down 5.58% from the same period. Among them, the average price of plate and strip was 4,523 yuan/ton, down 5.81%; the average price of pipes was 7026 yuan/ton, down 4.80%. During the reporting period, the company's gross margin was 5.26%, down 1.04pct. Mainly due to the company's precise cost control, it achieved a cost reduction of 7.43 billion yuan in the first half of the year, exceeding the annual target. Among them, the Q3 gross profit margin was 4.30%, down 3.99 pcts, and the ring fell 2.01 pct. Mainly due to the continued weak supply and demand situation in the steel industry in the third quarter, the domestic steel price index declined sequentially.

Expense rates increased during the period, and net profit declined sharply. The company's cost rate for the period was 3.03%, up 0.20pct. Among them, the sales expense ratio was 0.48%, down 0.03 pct; the management expense ratio was 1.06%, down 0.11pct; the financial expense ratio was 0.47%, up 0.21pct; and the R&D expense ratio was 1.01%, up 0.13pct, mainly because the company vigorously promoted core steel technology research. In the first half of the year, the company calculated various types of impairment losses totaling 0.115 billion yuan. The same period last year was an impairment return. Overall, in the first three quarters of 2024, the company achieved net profit of 5.882 billion yuan to mother, a decrease of 29.56%. Among them, Q3 net profit was 1.338 billion yuan, down 64.77% from the same period, and 48.92%. Profit margins continued to be compressed, mainly because the decline in steel prices was higher than the decline in raw material prices.

Operating cash flow has deteriorated, and the balance ratio has declined. The company's revenue ratio for the first three quarters of 2024 was 1.1304, up 1.34pct; the pay-to-cash ratio was 1.0441, up 1.46pct, mainly due to a decrease in the company's operating costs. Overall, the net operating cash inflow was 15.638 billion yuan, an increase of 2.383 billion yuan over the previous year; the net outflow from investment activities was 15.759 billion yuan, an increase of 14.898 billion yuan over the previous year, mainly due to a decrease in return on investment. The company's balance ratio was 40.51%, down 0.95pct from the end of last year.

Investment advice: In the first three quarters of 2024, the steel industry continued to be weak in both supply and demand. The company continued to optimize the product structure, reduce operating costs, and had high performance resilience. Considering the decline in demand, the company's net profit from 2024-2026 is expected to be 8.931, 10.261, and 12.011 billion yuan, corresponding PB of 0.7, 0.7, and 0.7 times, maintaining a “highly recommended” rating.

Risk warning: risk of exchange rate fluctuations, risk of downstream demand falling short of expectations, risk of raw material price fluctuations.