Bayi Iron and Steel (600581): Q4 Territory’s Internal Demand Downward, Company Performance Under Pressure

Bayi Iron and Steel (600581): Q4 Territory’s Internal Demand Downward, Company Performance Under Pressure

3

Q19 company profit 1.

170,000 yuan, downgraded to “neutral” rating On October 24, Bayi Iron & Steel released the 2019 third quarter report: 19 Q1-Q3 operating income 154.

90,000 yuan (YoY + 0.

7%); net profit attributable to shareholders of the parent company 2.

400 million (YoY-58.

4%) ;; 19Q3 operating income 59.

500 million (YoY-17.

0%, QoQ + 5.

9%); net profit attributable to shareholders of the parent company1.

1.7 billion (YoY-67.

8%, QoQ-63.

2%), the performance was lower than our expectations.

We think the company’s Q3 performance is the same, and the chain replacement is mainly due to the continued high prices of raw materials.

We have lowered our previous profit forecast and expect the company’s EPS in 19-21 to be 0.

19/0.

23/0.

27 yuan (previous value was 0.

31/0.

38/0.

43 yuan), cut the target price to 3.

10?

3
38 yuan, downgraded to “neutral” rating.

The price of raw materials went up, compressing the profit space of the company in 19Q3, and the sales volume was 152 and 163 titles (YoY-9.

1, -13.

3% in the fifth quarter.

5, + 10.

5%); meanwhile, the average iron ore price (excluding tax) of Tangshan iron powder is 708, 733 yuan / ton (YoY + 190, + 310 yuan / ton, QoQ + 87, 130 yuan / ton), reducing profit margins.
19Q1-Q3, the company’s gross sales margin was 9.

6% (YoY-3.

5pct); 19Q3 sales gross margin was 10.

4% (-5% YoY).

0pct, QoQ-2.

7pct).

19Q1-Q3, the company’s sales, management, research and development, and financial costs changed by -2%, + 36%, -5%, -19%. The increase in management costs was mainly due to the increase in security and greening costs, and the decrease in financial costs was mainly due to liquidityIncreased corporate interest income increased.

In 19Q3, the company’s sales, management, research and development, and financial expenses changed by -29%, + 29%, + 27%, and -11%, respectively.

The company’s ability to repay increased, the asset-liability ratio dropped 19 Q1-Q3, and the cash received by the company from selling goods and providing labor services accounted for 102 of operating income.

3%, +14 from the same period last year.

9pct, the ability to collect money increased; the net cash flow from operating activities decreased by 108%, mainly due to the increase in raw material prices, and the company increased the speed of payment of raw materials.During the same period, the company’s receivables and payable items decreased by 7 compared with the beginning of the previous period.

1%, 5.

7%, the ability to account for downstream funds goes up.

In addition, the company’s asset-liability ratio continued to decline, and the asset-liability restructuring at the end of the third quarter of 201977.

6%, down by the end of the second quarter of 2019.

44 points.

In the fourth quarter, the internal demand of the territory may decline, and the company’s performance may be slightly under pressure in 2018. Xinjiang’s fixed asset investment growth target is 15%, and the actual growth rate is -25.

2%, the completion rate is poor; 南京桑拿网 in 2019, Xinjiang ‘s fixed asset investment growth target is 5%, the growth rate in the first nine months is 6.

1% (YoY + 49pct), better completion, considering the high base in the second half of last year, Xinjiang may complete this goal this year.

However, Xinjiang is located in the northwestern mainland. It is cold in winter and spring, and is warmed only by summer and autumn, which is suitable for construction. It is the peak season of steel demand in Xinjiang.

During the high season, the company’s products are mainly oriented to the Xinjiang market. During the low season, the proportion of products sold outside Xinjiang increases.

In the fourth quarter, the internal demand of the territory may fall, the company may increase the proportion of external sales of the territory, and the selling expenses may increase the pressure on the performance slightly.

The high cost caused the company’s performance to be under pressure, and the rating was downgraded to “Neutral”. Because the price of raw materials is still at a high level, we lowered the company ‘s profit forecast.

19/0.

23/0.

27 yuan (previous value was 0.

31/0.

38/0.

43 yuan), the corresponding PE is 17.

53/14.

20/12.

11 times, PB is 1.

15/1.

07/0.

98 times.

Comparable companies PB (2019E) average 1.

03, considering that the company is a leading steel company in Xinjiang, given the company January 2019.

1?
1.

2x PB estimate.

The predicted BPS for 2019 is 2.

82 yuan, corresponding to the target price of 3.

10?3
38 yuan, downgraded to “neutral” rating.

Risk warning: macroeconomic expectations and policy adjustments at home and abroad; less-than-expected demand in the territory.