Matters:
On April 19, 2022, Meng Wei, deputy director of the Political Research Office of the national development and Reform Commission and spokesman of the national development and Reform Commission, said at the press conference of the national development and Reform Commission in April that in order to maintain the continuity and stability of policies and consolidate the results of crude steel output reduction, the national development and Reform Commission, the Ministry of industry and information technology, the Ministry of ecological environment and the National Bureau of statistics will continue to reduce the national crude steel output in 2022, Guide iron and steel enterprises to abandon the extensive development mode of winning by quantity and promote the high-quality development of the iron and steel industry.
Guoxin metal’s view: 1) the national development and Reform Commission has made clear its position on crude steel output, adhered to “one general principle and highlighted two priorities”, and ensured the year-on-year decline of national crude steel output in 2022. The pressure drop of crude steel output will help the industry maintain a stable operation and restrain the price of iron ore. Under the pattern of top supply, the profit of black industrial chain is expected to tilt to the steel mill end again. 2) The steady growth policy continued to work, and steel consumption is expected to improve. In terms of real estate, in order to prevent the risk of hard landing, the local real estate market regulation policies tend to be liberalized, and the policies are still increasing, which helps to improve market sentiment. The growth rate of infrastructure investment is also expected to stabilize with the steady growth policy, so as to drive steel consumption and play the role of counter cyclical regulation. 3) Resumption of trading in 2014, the steel sector achieved excess returns under the expectation of weak fundamentals and strong expectations. 4) Investment suggestion: the steel sector in the second quarter is expected to usher in the dual direction policy force of supply and demand, steady growth, underpinning steel consumption, continuous relaxation of real estate policy, year-on-year decline in supply and improvement of industrial exports. From historical experience, the steel sector, as a pro cyclical target, has achieved a high winning rate of excess return in the wide credit stage. At present, the improvement of demand margin is expected to form a strong support for steel prices, and the controlled crude steel output is conducive to the maintenance of industry profits. In addition, the leading steel plant has achieved outstanding results in reducing cost and increasing efficiency in recent years, the profitability toughness has been repeatedly verified, and maintained a high proportion of cash dividends. Therefore, from the current time point, we believe that there is a large space for valuation repair of industry leaders, and we recommend paying attention to Hunan Valin Steel Co.Ltd(000932) , Baoshan Iron & Steel Co.Ltd(600019) , Xinyu Iron & Steel Co.Ltd(600782) , Sansteel Minguang Co.Ltd.Fujian(002110) .
