Weak supply and high growth steel profit will improve
The reduction of production capacity and the cleaning of “strip steel†have made the supply and demand of the standard steel products in Pudong Steel relatively balanced. As the environmental protection policy continues to increase, the demand for superposition will grow steadily, and the steel market will show a “weak supply†trend in 2018. The overall profitability of the industry has further improved, and the average debt ratio of enterprises has shown a downward trend, and the investment value of the sector has been highlighted. High performance growth Statistics show that as of June 27, eight listed companies released the first half of the performance forecast, except for the ST Shanghai Branch due to restructuring and transformation, the other seven are pre-history, is expected to grow by more than 50%. Shagang has the highest pre-increment. The net profit for the first half of the year is expected to be 454 million yuan - 548 million yuan, an increase of 140% -190%. Shagang said that steel prices remained high and fluctuated, which was a large increase compared with the same period of last year. Operating income and product sales gross profit increased year-on-year. At the same time, the company vigorously carried out the benchmarking and potential efforts to reduce costs. Sangang Shuguang said that it achieved a net profit of 966 million yuan in the first quarter and achieved the best first-quarter operating results in history. Judging from the current situation, the operating conditions in the second quarter are stable and positive. The net profit for the first half of the year is expected to be 1.416 billion yuan to 1.556 billion yuan, a year-on-year increase of 31%-81%. Since the second quarter, the industry's environmental protection measures have been continuously overweight, benefiting from the non-heating season limit production, environmental supervision, "reviewing", winning the blue sky defense war plan, etc., the supply is restricted, pushing up the price of raw materials, especially coking, etc. The rise in steel prices has played a leading role. Industrial Securities analysts said that since the second quarter, the demand for steel in the off-season is not weak, the supply end is limited by environmental protection, and the steel price is at a high level. Up to now, the average gross profit per ton of rebar and hot rolling has increased by 26% and 20% respectively compared with the first quarter. It is expected that the relevant steel enterprises' second quarter results will be better than the first quarter. According to the daily gross profit per capita data tracked by Guotai Junan, it has rebounded sharply from the bottom in early April. At present, steel prices remain high at 1,200 yuan/ton; compared with the first quarter, the chain growth rate is nearly 30%. In the second quarter, the industry's performance has a high probability of high growth, and leading companies are expected to exceed expectations. CITIC Jiantou believes that the short-term rebar spot price will fluctuate between 4,000 yuan and 4300 yuan/ton, and the profitability of steel mills will remain stable. It is expected that the net profit of Shenwan-listed steel enterprises in the first half of the year is expected to exceed 45 billion yuan, a year-on-year increase of more than 100%. "weak supply" appears According to the statistics of China Iron and Steel Association, in June 2018, the total social inventory of steel products of five major categories in 20 cities nationwide continued to drop sharply; and the inventory of five varieties declined, especially for wire and rebar. The total inventory this month was 9.67 million tons, a decrease of 1.72 million tons from the previous month, down 15.1%. Fan Haibo, chief analyst of Cinda Securities, told the China Securities Journal that since the second quarter, the inventory of steel mills in the whole society has dropped significantly, down nearly 50% from the average in the first quarter. The price of standard steel products represented by rebar, wire and cold-rolled sheet rose by about 15%. The decline in inventories, corresponding to the rise in product prices, reflects the true relationship between supply and demand. According to the National Bureau of Statistics, from January to May, fixed asset investment increased by 6.1% year-on-year. Among them, infrastructure investment increased by 9.4%, manufacturing investment increased by 5.2%, national real estate development investment increased by 10.2%, and residential new construction area increased by 13.2%. Driven by consumption growth, crude steel output in January-May was 369 million tons, a year-on-year increase of 5.4%. In terms of supply, since 2016, the cumulative reduction of crude steel production capacity has exceeded 120 million tons, and the production capacity of about 140 million tons of “strip steel†has been eliminated, which has purified the market environment. In 2018, it will also reduce the capacity of 30 million tons, while the new capacity is limited. Guotai Junan Research believes that the overall demand will remain stable in 2018, the growth rate of real estate infrastructure investment will stabilize and decline, and the manufacturing industry will pick up. The supply-side electric furnace steel superimposed blast furnace re-production and utilization coefficient will increase to increase, and the capacity and production limit will be reduced. It is estimated that the annual supply growth will be 20 million tons, the capacity utilization rate will continue to rise, and the steel price will fluctuate at a high level throughout the year, maintaining the rebar price center at 3,800 yuan/ton-4000 yuan/ton. Fan Haibo said that after the capacity reduction and the “strip steel†were cleaned up and rectified, the industry entered a market environment with a basic balance between supply and demand. With the continuous deepening of environmental protection and production restriction measures, the supply side of the steel market will be further tightened, and the “weak supply†situation will emerge. In 2018, the industry will usher in the "most stringent" ultra-low emission standards. On May 17, the "Working Plan for Enterprise Ultra-low Emissions Reconstruction (Draft for Comment)" was issued, and specific requirements were imposed on the ultra-low emission standards of enterprises. For example, the emission concentration of flue gas, particulate matter, sulfur dioxide and nitrogen oxides of sintering machine and pellet roasting machine are not higher than 10 mg, 35 mg, 50 mg/m 3 respectively, and the emission concentrations of other pollutants, sulfur dioxide and nitrogen oxides are respectively Not more than 10 mg, 50 mg, 150 mg per cubic meter. Fan Haibo said that such strict environmental protection emission standards are difficult for most enterprises in the industry to meet the standards. If the ultra-low emission standard is officially launched, the industry will face a new round of investment in environmental treatment facilities such as flue gas, wastewater and waste residue. As environmental protection requirements continue to tighten, the industry's environmental protection measures will be "normalized." Investment value highlights Li Xinchuang, president of the China Metallurgical Planning Research Institute, told the China Securities Journal that in the first four months of this year, the sales revenue of key statistical enterprises was 1.25 trillion yuan, a year-on-year increase of 12.5%, and the accumulated profit was 78.7 billion yuan, a year-on-year increase of 123.3%. Statistics show that as of the end of the first quarter of 2018, the average debt-to-asset ratio of A-shared steel companies fell from a high of nearly 72% in the previous period to about 60%. The decline in corporate asset-liability ratio mainly lies in the increase in steel prices since 2017, and the improvement of corporate profits and cash flow. As of the end of 2017, the average ROE of A-share listed steel companies is close to 15%, compared with -17% of the lowest point in 2015. There has been a significant improvement. As of March 2018, the average gross profit margin of A-share Pugang enterprises was 13.03%, and the net sales margin was 6.39%, which was 3.02% and 4.99% higher than that of 2016. Cinda Securities said that with the increase in the profit margin of steel products, the asset-liability ratio of listed companies in the general steel industry in 2018 will continue to decline, and the average gross profit margin will maintain the 2017 average. At the same time, there are many positive factors in the cost side. For example, technological advances in the industry have enabled large-scale steel companies with long processes to add appropriate amounts of scrap in the field of hot metal processes to increase the rate of tapping. Industry insiders pointed out that factors such as the continued slowdown of cost-side pressure will further weaken the profit cycle characteristics of the stocks and may enhance the valuation center of the stocks. According to the CIC Research Report, the overall PE valuation of the current stock is less than 9 times, and the PE of a group of steel enterprises is 5 times or less. The overall credit risk of the industry is low. Whether from the security of credit risk measurement or the investment of profit valuation dividend measure, the attractiveness of stocks increases. Hyundai Parts,Machinery Spare Parts,Hyundai Aftermarket Parts,Dump Truck Spare Parts JINING SHANTE SONGZHENG CONSTRUCTION MACHINERY CO.LTD , https://www.stszcmparts.com