Valin Steel (000932) dynamic comment: Profits from environmentally-restricted companies are expected to improve significantly compared to the previous month
Investment points: Environmental protection and limited production have pushed up steel prices, and the company’s profitability has improved significantly.
According to environmental protection requirements, on June 23, the Tangshan Municipal Government issued a notice of the city’s iron and steel enterprises to suspend production and limit production, with a limit of 20% -50%, and blast furnace grills to suspend production.
The sintering machine, converter, and lime kiln equipment were shut down on the same day, and the blast furnace was shut down on June 27. In August, it was decided whether to continue the implementation according to environmental conditions.
This time the Tangshan region has a strong production restriction and strict implementation. Regional steel companies are constrained by environmental protection policies, the supply contraction is significant, and the industry’s overall inventory reduction trend is obvious.
Environmental protection and production restriction disturbed the steel price, which caused the short-term price rise of tons of steel. As a result, the company’s profitability was expected to improve significantly from the previous month.
The proportion of high value-added products increased, and the product structure was further optimized to create regional competitive advantages.
Facing the current imbalance in the product structure of the domestic steel industry and the large-scale import of high-end key high-quality varieties, the company further promoted the optimization of its product structure and continued to make breakthroughs in high-strength steel and market applicability, in line with the trends of high-strength, lightweight, environmental protection, energy saving and high efficiency.
At the level of process technology and 杭州桑拿 equipment, Hualing Xianggang’s five-meter plate and wire rod, Hualing Lianyuan Steel’s 2250 hot rolling, Hualing steel pipe’s 720 unit, VAMA high-end automotive sheet, the technology and equipment level is leading domestically.
In terms of product structure, Valin Xianggang is the world’s largest supplier of medium and heavy plates to Caterpillar (the leading manufacturer of global construction machinery). It can produce and supply a full range of high-quality heavy plates for construction machinery with strength grades from 290 MPa to 1100 MPa.The thickness of the product ranges from 6 to 200 mm and the width of 900 to 4800 mm. The wear-resistant steel produced by Valin Lian Steel is the highest grade and the thinnest in China, breaking through the import monopoly.1. The domestic market share of ultra-thin wear-resistant steel exceeds 70%, and stable supply of 1100MPa high-strength steel has been achieved. 1300MPa-grade steel has been successfully developed. Currently, 1500MPa ultra-high-strength steel is being pre-researched, and 600-1300MPa exceeds 40%.Rotary drill pipe produced by steel breaks import dependence. The current domestic market share is over 50%, which solves the problems of high import prices, long delivery times and high transportation costs for domestic buyers. It breaks the monopoly of foreign markets and opens up abroad.Product prices are down.
The company takes R & D and innovation as the fulcrum to achieve product upgrades and structural optimization.
The company plans to issue shares to acquire the equity of “Sangang”, and to purchase Hualing Energy in cash to optimize its financial structure and reduce leverage.
According to the announcement on June 14, the company issued shares and paid cash to purchase assets from 6.
41 yuan / share adjusted to 4.
58 yuan / share; the number of shares issued is 13.
6.3 billion shares adjusted to 19.
07 billion shares, acquired Hualing Xianggang 13.
68% equity, Valin Liangang 44.
17% equity, Valin Steel Pipe 43.
42% equity, 100% equity of Valin Energy.
After the completion of the acquisition, the company will wholly-owned “Sangang” and Valin Energy Conservation to realize the overall listing of the Group’s steel assets. Mergers and acquisitions will help the company strengthen internal resource integration, reduce the asset-liability ratio, and enhance its sustainable operating capabilities.Interest resist 78.
1 ppm, reducing financial costs and improving anti-risk capabilities, the company’s financial costs in the first quarter of 2019 decreased by 39.
31%, only 2.
The company actively promotes the optimization of capital structure and reduces leverage to improve its ability to resist risks.
Earnings forecast and investment rating: Maintain Buy rating.
The company is one of the top ten iron and steel enterprises in the country. It is a leading steel enterprise in Hunan Province. It is supported by R & D and innovation. Its products are continuously upgraded to the mid-to-high end.Segments such as boards have expected competitive advantages.
Through internal acquisition and integration, the company reduced its leverage ratio and improved its overall anti-risk capability, and its capital structure was continuously optimized.
The efforts to limit environmental protection and production are strong, and the steel price has been promoted. The company’s profitability is expected to improve significantly from the previous month.
Regardless of the dilutive factors and acquisition impact of the shares issued this time, the company’s EPS for 2019-2021 is expected to be 1.
54 yuan, corresponding to PE 3.
18 times, maintain BUY rating.
Risk warnings: The implementation of environmental protection and production restriction is less than expected; the macroeconomic weakness continues to be low; downstream demand is lower than expected; market share is changing due to changes in the competitive landscape; the progress of share issuance is lower than expected;