21 Hard Core Investment And Research

As long as the opportunity is given, the profits of cycle stocks will increase greatly, even if the duration is very short.

As of June 23, Anshan Iron and Steel Co., Ltd. and CITIC Special Steel Co., Ltd. have issued interim report forecasts. The net profit of the former increases by 860% in the first half of the year, while that of the latter is only more than 50% due to its stable business performance.

In contrast, Angang Steel, whose main products are plates, is more representative, and its performance change trend is highly consistent with the profit evolution of the whole steel industry.

And behind the company's profit surge is the rapid rise in the second quarter of the industry's profits per ton of steel.

According to the half month inventory cycle of iron ore and raw materials, Lange Iron and steel estimates the profit per ton of steel plate. In the first quarter of this year, the average profit per ton of seven major steel products, including billet, screw thread and hot rolled coil, was 165 yuan / ton. However, as of June 18, this figure had risen to 729 yuan / ton.

To specific companies, although there are some differences in cost control ability and product structure, it is enough to predict the profit trend of steel stocks in the second quarter.

In this view, other steel stocks that have not yet updated the interim report forecast, especially the general steel production enterprises, are expected to achieve a significant growth in the second quarter net profit, which will further drive the overall profit in the first half of the year.

However, considering multiple factors such as policy regulation, cost pressure and demand support, it is difficult to sustain the profit per ton of some varieties exceeding the peak value in 2018, at least the following profit evolution trend is not optimistic.

The single quarter profit is more than 3.2 billion yuan

In March this year, when Tangshan, an important iron and steel town, took the lead in limiting production, there was a "new round of supply side reform" in the industry, and steel stocks also rose systematically.

The core logic is that the contraction of supply side will lead to the rise of steel price, and then push up the profit margin and profit scale of relevant listed companies.

However, from Angang's medium term forecast, performance may exceed market expectations.

On June 18, Anshan Iron and Steel Co., Ltd. issued an interim notice. The company expected to achieve a net profit of 4.8 billion yuan in the first half of the year, up 860% from 500 million yuan in the same period of last year.

This is equivalent to the company's net profit of 3.28 billion yuan in the second quarter, double the net profit of 1.52 billion yuan in the first quarter, surpassing the peak value of 2.415 billion yuan in the third quarter of 2018 in the middle and later period of "de capacity".

In response, Angang said, "in the first half of 2021, the company seized the favorable opportunity of steel market recovery, focused on efficiency, cost, technology, service, wisdom and ecology, adhered to systematic thinking, made efforts to improve efficiency, and vigorously explored the market..."

Behind it, there is a solid industry prosperity as a support.

In the second quarter of this year, domestic steel prices first rose and then fell, and the overall operation was at a high level. Over the same period, iron ore, coke and other raw materials also rose sharply, and even their prices were firmer.

In a rough view, the profit margin of steel enterprises will not change too much with the increase of cost and product price. However, when it comes to the specific production level, it involves an inventory cycle.

That is to say, the raw materials of steel currently produced are mostly coke and iron ore purchased by steel mills half a month to a month ago, and the production cost is mostly the price of one month ago.

Comparing the prices of the above products, it can be seen that the hot-rolled coil plate has been rising from the beginning of February to the first ten days of May, while the coke is only rising from the last ten days of March. At least, in April this year, steel mills are still using lower price coke and iron ore raw materials.

Comparing the profit trend of ton steel, we can clearly see the process of profit expansion.

In the first quarter, the profit per ton of seven major steel products, such as billet, screw thread and hot-rolled coil, fluctuated below 500 yuan / ton, and began to expand in early April, and quickly exceeded the 1000 yuan / ton mark in the same month.

Although, affected by the domestic policy regulation and control, the steel price dropped significantly, but the rising market directly brought the average profit per ton of steel to a new level.

Lange Steel's calculation results show that in the second quarter of this year (as of June 18), the average profit per ton of hot rolled coil steel was 815 yuan / ton, while the same period in 2018 was only 808 yuan / ton.

In contrast, more than 90% of Angang's revenue comes from hot rolling, cold rolling and other sheet products. It is natural that the company's single quarter profit exceeds the "de capacity" period.

The elasticity of semi annual report performance of plate enterprises is greater than that of building materials

Compared with 2018, the prosperity of the steel industry in the second quarter of this year has picked up, with some obvious differences.

In 2018, the core driving force of steel price rise has brought supply side contraction for capacity reduction. Although there are expected factors of contraction caused by Tangshan production restriction in the second quarter of this year, the recovery and pull of demand side cannot be eliminated under the condition of sustained economic recovery at home and abroad.

In addition, at the initial stage of property market regulation in 2018, the main demand of steel industry was building materials. This year, driven by the macroeconomic recovery, the terminal consumption was machinery, shipbuilding and automobile plates, showing a bright performance.

Therefore, although the steel price rose systematically, the driving effect of each demand side is different, and the internal subdivision of building materials and plate profit promotion is different.

Feed back to the above-mentioned profit per ton of steel data trend, the second quarter of this year also appeared the plate to enhance the extent of greater than building materials.

First of all, for building materials, the average profit per ton of rebar in the first quarter of this year was 80 yuan / ton, which rose to 508 yuan / ton in the second quarter (June 18).

During the same period, plate benefited from its better supply and demand, and the profit per ton of steel increased more obviously. During the same period, the profit per ton of hot-rolled coil increased from 176 yuan / ton to 815 yuan / ton, while that of cold-rolled coil increased from 370 yuan / ton to 809 yuan / ton.

It is not difficult to see that the profit margin of plate products is significantly higher than that of building materials products. And the difference of this industry's profit change may also be reflected in the semi annual report of relevant listed companies.

As far as the existing A-share listed steel enterprises are concerned, the product structure of the top steel enterprises in the industry is also mainly plate, which is the case with Baosteel and Angang. The income of Baotou Steel and Valin steel sheet accounts for about 50%, and other bar, profile and pipe products are also included.

In contrast, rebar and other building materials income accounted for a relatively high proportion, mostly for regional iron and steel enterprises, such as Bayi Iron and steel and Minguang No.3 steel. The latter will have a total revenue of 48.6 billion yuan in 2020, with steel sales contributing 37.2 billion yuan, including 19.7 billion yuan from rebar.

Under the above background, the profit elasticity of head steel enterprises, which account for a higher proportion of plate income, is expected to be slightly higher than that of building materials manufacturers in the upcoming interim report.

Profit per ton of steel has fallen continuously

Tracking industry prosperity, it is easy to predict the second quarter profit of steel stocks. This is certainly exciting good news, but the bad news is that profits of more than 1000 yuan per ton of steel are difficult to maintain and have begun to fall.

The average profit per ton of the above-mentioned seven steel products has been falling for more than a month since the average profit of the above-mentioned seven steel products has briefly exceeded 1000 yuan.

The reason for this is the policy, cost and demand and other factors.

First of all, in terms of policy, since the middle of May, the State Council has repeatedly mentioned the rise of commodity prices, demanding "supply and price stability". Since then, various departments have entered the implementation stage.

Just take the latest news as an example. According to the news on June 23, recently, the price department of the national development and Reform Commission and the price supervision and Competition Bureau of the General Administration of market supervision have sent a number of joint working groups to relevant provinces and cities to investigate the issue of ensuring the supply and price of bulk commodities.

The working group will have a detailed understanding of the situation of relevant enterprises participating in the futures and spot market transactions of bulk commodities, listen carefully to the reflection of middle and lower stream enterprises on the changes of upstream supply quantity and price, as well as suggestions on combating speculation and ensuring market supply, and listen to the opinions of relevant experts and market institutions on strengthening linkage supervision of futures and spot markets and maintaining normal market order.

It can be predicted that the turning point of bulk commodities has not been established yet, and the black commodities with obvious "independent pricing" characteristics will be the focus of domestic policy regulation.

Performance in the price level, even if steel prices still have rising demand in the second half of the year, under the strong suppression of the policy side, the rising space will be significantly less than that in the first half of the year.

Secondly, the cost side of the suppression effect is increasing.

"From the perspective of recent market performance, the effect of cost on the profit of steel enterprises is relatively obvious. The recent profit per ton of rebar has dropped to 51 yuan per ton, which means that some steel enterprises with insufficient cost control ability have begun to suffer losses." Lange Iron and Steel Research Center Director Wang Guoqing said.

For example, in the recent decline of black series commodities, the fall rate of coke and iron ore is obviously less than that of steel, and the price is relatively firm. On the side, it also reflects the stronger bargaining power of coke enterprises, which is not conducive to the expansion of profits per ton of steel.

Finally, there is the potential downside risk on the demand side.

After entering the third quarter, steel downstream will enter the traditional consumption off-season“ From the perspective of industry demand, the decline of manufacturing orders will have an impact on the indirect export of steel, and steel will continue to rise with increasing difficulty. " Wang Guoqing pointed out.

In terms of building materials, the regulation and control of the property market continued to deepen. The trend of data such as new construction and land purchase area in a single month is not optimistic. Some of them show negative growth in a single month, which is difficult to form an effective support for steel.

Under the pressure of multiple factors, it is difficult to reproduce the profit per ton of steel of more than 1000 yuan in the second quarter.

As a result, steel stocks at this stage are faced with the contradiction that the performance of the interim report has increased greatly, but the profit expectation of the third quarter is weakening. Between love and hate, how to choose the secondary market will inevitably have some ups and downs.