\u3000\u3000 Baoshan Iron & Steel Co.Ltd(600019) (600019)
Performance summary: the company released the performance forecast for 2021. It is estimated that the net profit attributable to shareholders of Listed Companies in this year is 23.58-23.98 billion yuan, an increase of 86% – 89% over the same period of last year (12.68 billion yuan), equivalent to EPS of 1.06-1.08 yuan; It is estimated that the net profit attributable to shareholders of listed companies excluding non recurring profits and losses in the same period is RMB 22.53 billion-22.93 billion, an increase of 81% – 85% year-on-year.
The annual profit per ton of steel increased significantly and Q4 fell: according to the company’s announcement, the company realized a net profit attributable to the parent company of 5.359 billion yuan, 9.72 billion yuan and 6.512 billion yuan in the first three quarters of 2021 respectively. According to the upper limit of performance forecast, the net profit attributable to the parent company in the fourth quarter was 2.389 billion yuan, a month on month decrease of 63% and a year-on-year decrease of 50%. According to the previous announcement, the sales volume of commodity blanks of the company in the first three quarters was 11.56 million tons, 12.7 million tons and 9.95 million tons respectively. If the production and sales situation in 2021 is the same as that in 2020, the sales volume in the fourth quarter is estimated to be about 11.76 million tons. According to this calculation, the quarterly net profit per ton of steel is 523 yuan, 844 yuan, 737 yuan and 184 yuan respectively (estimated value). The annual net profit per ton of steel is 571 yuan, an increase of 88% year-on-year.
The combination of two-way extrusion of purchase and marketing and the rise of fixed expenses led to the decline of Q4 performance: there are two main reasons for the sharp decline in the profitability of per ton steel in the fourth quarter. On the one hand, affected by the dual control of energy consumption, the price of ferroalloy has climbed to a historical high, and the electricity price has been raised. The impact of the cost of these raw and auxiliary materials on the cost of per ton steel has reached more than 100 yuan. In the environment of weak demand and weak steel price, the rising cost cannot be smoothly transmitted to the downstream, and the provision for inventory falling price is also made. On the other hand, the company incurred several fixed expenses in the fourth quarter, including the depreciation of front and rear end processes and public and auxiliary facilities for Zhanjiang No. 3 blast furnace officially put into operation in 2022; Environmental remediation fees settled centrally at the end of the year to speed up the establishment of class A enterprises; And the unified liquidation of maintenance fees, cooperation fees, employee performance awards and other funds.
The company has four manufacturing bases, including Baoshan in Shanghai, Qingshan in Wuhan, Dongshan in Zhanjiang and Meishan in Nanjing, with a total crude steel production capacity of more than 48 million tons. From the perspective of profitability per ton of steel, although Baoshan base has always led with differentiated advantages, Dongshan base benefits from the continuous optimization of variety structure while maintaining the original cost advantage, and Dongshan’s profitability has a great potential to catch up with and surpass Baoshan. In addition, Zhanjiang No. 3 blast furnace project in Dongshan base was put into operation on January 7. It is mainly used to produce high-strength steel and other high value-added varieties. The product has high profitability, and will create an increase of 3.6 million tons of crude steel after reaching the production capacity. The rest of Meishan base and Qingshan base are also carrying out corresponding technical transformation and structural adjustment, and strive to finally realize the non differentiated supply of proximity.
Top products: ten million ton cold-rolled automobile sheet and five million ton silicon steel are the top products of Baosteel, and their contributions to the company’s gross profit are 25% and 20% respectively. Baosteel’s cold-rolled automobile sheet has maintained a market share of more than 50% for many years, and high-strength steel will be the focus of the company’s automobile sheet development in the future. In terms of silicon steel, Baosteel is currently the largest supplier in the world, and its products are in short supply. The company has formulated the capacity development plan of silicon steel, which is divided into two steps. In the first step, the production capacity of high-end oriented silicon steel will reach 1.16 million tons / year, that of non oriented silicon steel will reach 3.15 million tons / year (including Dongshan base), and that of high-grade non oriented silicon steel will reach 1.1 million tons / year. In the second step, the production capacity of high-end oriented silicon steel will reach 1.5 million tons / year, that of non oriented silicon steel will reach 3.8 million tons / year (including Dongshan base), and that of high-grade non oriented silicon steel will reach 2.1 million tons / year. At the beginning of this year, Weilai, a new force in car manufacturing, signed a strategic cooperation agreement with Baosteel. The two sides will cooperate in non oriented silicon steel and high-strength steel automobile sectors.
Investment suggestion: Baosteel, as the industry leader, mainly produces medium and high-end sectors. In the first three quarters, the company benefited from the high outlook of the industry, and the production and sales of steel showed a state of simultaneous rise in volume and price. However, in October, due to the rapid switching between strong and weak cycles, the company’s purchase and sales price difference narrowed and the profit level per ton of steel decreased significantly. However, in the long run, the increase of industry concentration will be conducive to the long-term enhancement of product profitability. Considering the contribution of the increase in steel volume and price in the first half of 2021 to the company’s profitability and the contribution of the production of Zhanjiang No. 3 blast furnace in 2022 to the revenue in the next two years, we adjusted the net profit attributable to the parent company from 2021 to 2023 to 23.8 billion yuan, 16.1 billion yuan and 19.5 billion yuan respectively (the value before adjustment was 23.1 billion yuan, 16.6 billion yuan and 18.6 billion yuan), equivalent to 107 yuan 0.72 yuan and 0.87 yuan (the value before adjustment is 1.04 yuan, 0.72 yuan and 0.84 yuan), corresponding to 7 / 10 / 8 times of the current share price PE. The company benefited from the long-term rise of the bargaining power of the industry and maintained the “overweight” rating.
Risk warning event: the sharp decline of macro economy leads to pressure on demand; The pressure at the supply end continues to increase.
