Current investment tips:
On the supply side, the production restriction in North China led to a sharp year-on-year decline in steel production in the first quarter, but the ring ratio rebounded slightly. In the first quarter of 22, under the influence of the limited production in the heating season in North China, the steel production was greatly disturbed. At the same time, the profit of South China electric furnace steel plant was depressed due to the high scrap price, and took the initiative to reduce the production. Finally, the national weekly average output of steel in the first quarter decreased by 10.52% year-on-year. However, due to the low base in the fourth quarter of 21, it increased by 2.58% month on month. Meanwhile, the steel demand in the first quarter was also relatively low, with a year-on-year decrease of 7.63% and a month on month decrease of 11.53%. By industry, the capital problem of the real estate industry has not been recovered, and the sluggish construction leads to the low demand for rebar; The recession of real estate also leads to weak demand for construction machinery and household appliances; In addition, the conflict between Russia and Ukraine has an impact on chip supply, the problem of car core shortage continues, and the demand has not improved; Only the demand for ships and containers is good, but it is difficult to change the weak situation of total demand. Under the weak supply and demand, the steel inventory level is at a low level. At the end of the first quarter of 22 years, the total steel inventory in China was about 23.45 million tons, a decrease of 12% over the same period of 21 years and 34% over the same period of 20 years.
In the first quarter of 2022, the prices of the five major varieties of steel increased, and the prices of raw materials also increased to varying degrees. Although the demand fell sharply, the supply was also under pressure. In the first quarter, the steel price fluctuated upward. The five varieties of thread, wire rod, hot rolled sector, cold rolled sector and medium and heavy sector increased by 7.1%, 6.2%, 10.4%, 4.8% and 4.2% respectively from the end of December 21 to the end of March 22.
On the raw material side, although the demand fell due to the limited production of steel, the prices of iron ore, coking coal and coke rose under the expected impact of the resumption of steel production after the Spring Festival. In terms of iron ore, although the demand for iron and steel was sluggish due to the limited production of iron and steel, the shipment volume of overseas mines fell seasonally. Combined with the impact of the expected resumption of iron and steel production, the price of iron ore fluctuated upward, with an increase of 25.2% at the end of March 22 compared with the end of December 21. Although the demand for coking coal and coke is weak, the supply is also tight. The price at the end of March 22 increased by 29.1% and 29.6% respectively compared with the end of December 21. On the whole, the gross profit of different varieties of steel rebounded month on month, and the improvement of longer sector products was greater. The average weighted gross profit of long and sector in the first quarter of 2022 increased by 102 yuan / ton and 141 yuan / ton respectively compared with the fourth quarter of 2021.
The overall gross profit level of the industry improved month on month in the first quarter. However, due to the inconsistency of different steel enterprises affected by the production restriction in North China, the performance of steel enterprises in the first quarter is expected to be differentiated; Relatively speaking, the profits of special steel enterprises are relatively stable, and the cost side pressure of ordinary steel enterprises is large. However, considering that the annual total output is expected to remain unchanged, we maintain the annual profit forecast. Key stocks with a year-on-year profit growth rate of more than 100% in the first quarter of 22 include: Yongxing Special Materials Technology Co.Ltd(002756) (516.1%, the leader of stainless steel long materials, and the volume and price of lithium carbonate business rise simultaneously); Key stocks with a year-on-year profit growth rate of 0-100% in the first quarter of 22 include: Zhejiang Yongjin Metal Technology Co.Ltd(603995) (7.2%; cold rolled stainless steel leader, with continuous growth of subsequent production capacity) Citic Pacific Special Steel Group Co.Ltd(000708) (4.5%; special steel leader with complete product structure and stable performance growth) Fushun Special Steel Co.Ltd(600399) (2.9%; China's leading superalloy industry); Other key stocks predicted that the year-on-year growth rate of profit in the first quarter of 22 years was less than 0%: Hunan Valin Steel Co.Ltd(000932) (- 0.9%; the proportion of leading steel enterprises in central and southern China and high-end varieties of steel gradually increased) Maanshan Iron & Steel Company Limited(600808) (- 3.1%); high elasticity steel enterprises in East China with both long and sector materials, with high dividend characteristics) Angang Steel Company Limited(000898) (- 3.5%; high-end Plate Companies) Baoshan Iron & Steel Co.Ltd(600019) (- 12.8%; leading in high-end sector, obvious advantages in automobile sector and silicon steel).
Investment analysis opinion: Although the short-term demand is disturbed by the epidemic, under the goal of stable growth, it is expected that the pre issuance of special bonds and major project investment will form a strong support for the subsequent steel demand, and the demand is expected to pick up in the second quarter. We maintain the "optimistic" investment rating of the industry and the investment rating of key companies in the industry. At the same time, under the background of "carbon neutralization", it is expected that the iron and steel industry will usher in a period of change and promote the overall upward movement of the profit center of the industry. General steel suggests paying attention to the low value and high elasticity target of long sector, the low value target of sector, and the target of low value Hunan Valin Steel Co.Ltd(000932) , special steel pays attention to the target of high temperature alloy Fushun Special Steel Co.Ltd(600399) , the target of stainless steel cold rolling leader Zhejiang Yongjin Metal Technology Co.Ltd(603995) , as well as the target of cycle crossing and stable performance Citic Pacific Special Steel Group Co.Ltd(000708) .
Risk warning: the duration of the epidemic is longer than expected, affecting the production of steel mills; Downstream demand was lower than expected, leading to a drop in steel prices.
