Sangang Minguang (002110) Company Comments: Profit Returns to Reasonable Level, Asset Integration Steadily Advances
Investment Highlights Performance Summary: The company released the semi-annual report for 2019 and achieved operating income of 189 in the first half.
20,000 yuan, an increase of 7 in ten years.
5%; net profit attributable to shareholders of listed companies21.
73 ‰, a decrease of 32 per year.
8%; net profit after deduction is 21.
2 ‰, a decrease of 11 per year.
The reported EPS is 0.
89 yuan, single quarter EPS are 0.
39 yuan and 0.
49 yuan; data per ton of steel: report that the combined company produces iron 433 vertical, steel 511 vertical, and material 508, while increasing by 1.
Based on the semi-annual report data, the ton steel ton is 3587 yuan, the ton steel cost is 2883 yuan, and the gross profit per ton of steel is 703 yuan, which has changed by 104 yuan, 333 yuan, and -229 yuan several times.Factors such as easing and the replacement of production capacity have led to the continuous growth of the supply side of the industry, and even under the driving of real estate, the demand performance is still strong, but the profit gap between the advance and retreat industries has widened and dropped.
From the perspective of some listed steel companies that have recently disclosed their performance, the net profit of most companies in the first half of the year changed by more than 35-70%. The performance of Sansteel fell more than the industry average, reflecting the relative stability of the company’s product earnings.
In terms of quarters, in the second quarter, the demand for expansion in the peak season expanded, and the profit of construction steel increased significantly. According to our calculations, considering the inventory cycle, the gross profit per ton of steel in the first two quarters of the industry scale was 542 yuan and 640 yuan.
The company’s products are mainly building materials. In the second quarter, net profit attributable to mothers increased by 26% month-on-month, basically in line with industry trends.
In terms of different products, the rebar and sheet gross margins were 22 respectively.
5% and 20.
2%, a decrease of 7 each year last year.
8% and 10.
In terms of financial data, the report resulted in a significant increase in selling expenses44.
7%, mainly due to the increase in transportation costs; financial costs are reduced by 114 each year.
6%, mainly because the net interest rate expenditure in the reporting period exceeded the expected decrease; the purchased capacity indicators helped the coastal strategy: on January 30 this year, the company finally won 9 by auction.
US $ 8.7 billion in own funds obtained the steel capacity index (iron: 100 pillars, steel: 100 frames) owned by Shanxi Iron and Steel Xinjiang Company. At present, asset delivery has been completed.
On December 12, 2018, the company and Fujian Yiwanxin Iron and Steel Co., Ltd. agreed on a framework agreement. The two parties used their respective steel capacity indicators to conduct strategic cooperation and establish a joint venture.
This cooperation will help the company incorporate its acquisition indicators into the coastal development strategy. Whether it is from the demand side or the raw material side, the logistics advantage is more obvious, and the cost advantage is further improved; the asset integration is on the agenda: in the first half of 2018,After the integration of Quanzhou Minguang, the company’s overall crude steel production capacity was 935 tons, which effectively solved the long-standing inter-industry competition between listed companies and Sanan Iron and Steel, and its market share in Fujian reached 50%.
The income scale and profit level have been greatly improved, further enhancing market competitiveness.
On January 15, 2019, the company issued an announcement that it intends to use the cash method to acquire 100% equity of Luoyuan Minguang from shareholders Sangang Group in cash, which is conducive to the smooth implementation of the capacity replacement program.
Continue to promote the overall listing of the Group’s main steel industry, and acquire new acquisition capacity indicators. The total crude steel capacity will increase to 1105, and the market share in Fujian will reach 70% by then.
Considering that Luoyuan Minguang is also located in the coastal area, the company’s coastal development strategy has gradually become clear; investment advice: through the decline of environmental protection and limited production and other supply-side substitution policies, the profit of the steel industry has gradually returned to a reasonable level.
The company’s coastal development strategy has steadily advanced through the outsourcing of steel production capacity indicators and the promotion of Luoyuan Minguang’s acquisitions to improve its logistics cost advantage.
The speed of demand recovery in the following peak seasons is worth paying attention to, and if it is renewed, it is expected to repair the pessimistic market expectations, and steel stocks will have a rebound opportunity.
The company’s EPS for 2019-2021 is expected to be 1.
70 yuan, 1.
81 yuan and 1.93 yuan, the corresponding PE is 4 respectively.
5X and 4.
2 times, maintaining the “overweight” level; risk warning: the framework agreement cannot be extended, the uncertainty of the acquisition of Luoyuan Minguang, the macroeconomic decline.