\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 808 Maanshan Iron & Steel Company Limited(600808) )
Event: the company released its 2021 annual report. In 2021, the company realized an operating revenue of 113851 billion yuan, a year-on-year increase of 39.50%; The net profit attributable to the shareholders of the parent company was 5.332 billion yuan, a year-on-year increase of 168.95%. The basic earnings per share was RMB 0.692, with a year-on-year increase of 168.22%, The company’s operating revenue in the fourth quarter was 28.035 billion yuan, a year-on-year increase of 19.8%; The net profit attributable to the parent company was -1.195 billion yuan, which was converted into a loss.
The high growth of the company’s revenue and net profit in 21 years benefited from China’s steel production restriction policy, better industry demand in the first half of the year and the improvement of its own operating efficiency. The overall price of steel is high, and the price of the company’s main products increases and profits increase. In the past 21 years, the selling prices of the company’s long materials, sectors and axles per ton were 4580 yuan, 5156 yuan and 10250 yuan respectively, with a year-on-year increase of 39%, 34% and 3% over the previous 20 years; In terms of profit, the gross profit margins of long products, sectors and axles were 8.7%, 16.6% and 15.6% respectively, of which the gross profit margin of sectors increased by 7.4% compared with 20 years, and the sales volume of sectors accounted for half of the total sales volume, which was the largest increment at the profit end. The loss in the fourth quarter is related to the deterioration of the overall fundamentals of Q4 industry. The overall gross profit margin of Q4 industry declined and inventory impairment was accrued due to price decline.
Increase in gross profit per ton in 21 years: the company is the leader of steel products in Anhui region, with rich product categories, accounting for half of the proportion of long materials and sectors. The total steel production capacity in 21 years reached 20.5 million tons, which is the best level in the history of the company. With its geographical advantages close to Hefei and Nanjing, the company radiates high demand areas for steel such as Jiangsu, Zhejiang and Shanghai, and its revenue accounts for more than 80% in the above areas. According to statistics, the premium rate of hot rolling and thread in the region is 8% – 10% higher than that in other parts of China. In the past 21 years, the company’s gross profit per ton increased significantly. The gross profit margin of cold rolled and hot rolled products increased by 12% and 1.2% respectively year-on-year in 21 years, and the gross profit per ton of steel of cold rolled and hot rolled products increased by 760 yuan and 175 yuan respectively year-on-year in 20 years, which was a large increase in a single year in the history of the company. On the cost side, the prices of raw and auxiliary materials such as iron ore and coke were high in 21 years. The annual average import price of iron ore increased by 49.3%, and the production cost of the company increased by 33% in the same period.
The company’s production and operation efficiency continued to improve. The parent company Maanshan Iron and Steel Group became a subsidiary of Baowu group through restructuring in 19, and the company was incorporated into Baowu system. In 21 years, the steel output was 20.45 million tons, and the utilization rate of steel production capacity was 99.76%. On the premise of no increase in crude steel output, the steel output increased by 2.97% year-on-year. The fee side decreased again. The revenue of three fees in 21 years accounted for 2.04%, a year-on-year decrease of 1.7%, and a decrease of 3.2% compared with that before joining Baowu group in 19 years. The management fee rate decreased significantly, from 3.04% in 19 years to 1.22% in 21 years. The per capita steel output increased significantly, and the per capita crude steel output reached 1120 tons in 21 years, an increase of 18% year-on-year in 20 years. The company has launched high-end products and continued the strategic reform of “excellent to special”. In terms of R & D expenses, the R & D expense rate of the company in 21 years is 4%, which is a new high in recent ten years. At the same time, new high-end production capacity was added. The company’s 3.2 million ton new special steel project was started in December of 21 to replace the traditional 3.7 million ton production capacity. The first phase is planned to be put into operation in June of 23 and the second phase is planned to be put into operation at the end of 24. The products are alloy steel, bearing steel, gear steel and other high-end automotive steels.
Investment suggestion: Maanshan Iron and Steel Co., Ltd. is the leading steel enterprise in Anhui Province, and enjoys the product premium in the downstream market according to its geographical location. In the past 21 years, the operating efficiency has been improved, and the level of expenses and gross profit has increased significantly. It is expected that the operating level of the company will continue to be stable and good. We believe that the downstream steel demand is expected to be stronger than 21 years. It is judged that there is limited upward space for steel prices this year. At the same time, the maintenance of the high price of raw materials makes it difficult for the industry’s profit level to return to the high level of 21 years. According to the 22-year forecast steel price, we expect the net profit attributable to the parent company from 2022 to 2024 to be RMB 4.571 billion (up 11% from the previous forecast value of RMB 4.113 billion), RMB 4.977 billion and RMB 5.478 billion respectively, with a year-on-year increase of – 14%, + 9% and + 10%; The corresponding EPS is 0.59 yuan, 0.63 yuan and 0.71 yuan, and the corresponding PE from 2022 to 2024 is 6.7 / 6.1 / 5.6 times respectively, maintaining the “overweight” rating.
Risk warning event: the actual demand is lower than expected, the pressure on the supply side continues to increase, and the price of raw materials has increased significantly
