Baosteel (600019) Interim Review: Significant cost reduction benefits Significantly lower gross profit per ton of steel than industry average

Core views: First, 2019H1: The decline in gross profit resulted in a continuous decline in profits38.

2%, cost reduction exceeded the target, helping to reduce the gross profit of the ton of steel by less than the industry average. Baosteel disclosed the 2019 Interim Report.

At the beginning of 2019H1, Baosteel’s sales of commercial raw materials 2335 initially increased by 0 each year.

4%; operating income of 140.9 billion yuan, a year-on-year decrease of 5.

2%; net profit attributable to owners of the parent company was US $ 6.2 billion, a year-on-year decrease of 38.

2%; basic return is 0.

28 yuan, down 37 each year.

8%; Estimated increase in average net asset income by 3.

48%, a decline of 2 per year.


Quantity: 2019H1, the company completed iron output 2283 tons, steel output 2429 tons; achieved sales of commercial billet 2335, an increase of 0.

4%, of which the steel sales volume in the second quarter of 2019 is expected to be 1220, which will decrease by 1 each month.

1% and liter 9.


Profit: In 2019H1, the company’s gross profit per ton of steel is 487 yuan / ton, which is gradually decreasing by 38.

At the same time, the gross profit per ton of hot rolled coil and cold rolled coil calculated by Mysteel decreased by 47%.

2%, 67.

7%, the company’s gross profit per ton of steel fell less than the industry average, mainly due to: (1) the company’s cost reduction performance is significant.

From one year to 2018, the company achieved cost reductions in the first half of the year31.

500 million, over 22 completed.

The annual target of US $ 800 million will effectively support the company’s operating performance; (2) WISCO’s limited profit performance is relatively better.

In the first half of 2019, WISCO Limited achieved net profit5.

700 million, down 33 every year.

7%, while the net profit of Zhanjiang Iron and Steel and Meishan Iron and Steel fell by 55 each year.

2% and 81.


Period expenses: During the first half of 2019, Baosteel Co., Ltd.’s ton steel period expenses were 364 yuan per ton of steel, which decreased by 8 every year.


Interest expenses and foreign exchange losses have been significantly reduced, resulting in a substantial decline in financial costs per ton of steel.

At 2%, the selling expenses per ton of steel decreased slightly, and the management expenses rose slightly.

Second, the 2019H2 plan: the completion of the crude steel production target is expected, the cost reduction is promoted, the multi-base coordination, and the allocation rate is steadily increased.

6 Initially, complete 50 of the long-term plan value.

4%, the expected completion of the crop target.

The 2019 production plan is initially completed, and 合肥夜网 the company expects crude steel output of 2389 in 2019H2.

4 for the first time, downgrading 2 every year.

6%, down 1 from the previous month.


Third, investment advice: Baosteel is committed to being a model for the special development of the steel industry and a leader in the future of steel.We expect the company EPS to be zero in 2019-2021.



67 yuan, corresponding to the closing price on August 22, 2019, the PE for 2019-2021 is 9.



82 times, PB is 0.



71 times.

The company’s evaluation system is consistent with the PB-ROE framework. Through the enhancement of performance stability, the PB-ROE relationship will gradually return.

The ROE is expected to be 7 in 2019.

6% calculation, the company’s PB to Wanda Quan A’s PB ratio will be repaired to 0.

5. Consider the central level of PB of Wonderwide A in the past three years.

7 times, the company PB will be revised to about 1.

About 0 times, according to the company’s forecast for 2019, the estimated net assets8.

05 yuan calculation, the company’s reasonable value is 8.

05 yuan / share, maintain “Buy” rating.

4. Risk warnings: Macroeconomics exceeds expected downlink; raw material prices exceed expected growth and erosion rates; uncertainty of environmental protection policies; supply-side structural reforms exceed expectations.