The valuation is ahead of the market, and the steel sector h

Guosen Securities (002736, Diagnostics)

Consumption is weakening, winter storage is starting

Under the rush of real estate companies, the actual demand for steel is weakening, but it continues to be better than the previous winter and the market. Previously, it was expected that the output was higher than in previous years but the inventory did not accumulate significantly. From the current point of view, compared with previous years, the absolute value of steel stocks is relatively low, the speed of accumulated warehouses is slow, and the start time of accumulated warehouses is relatively late. Steel traders are also relatively cautious about winter storage. Therefore, the height of accumulated warehouses before or after the Spring Festival is lower or lower. last year. The time for the Spring Festival has been less than one month. With the introduction of the steel factory's winter storage policy, the adjustment of steel prices and the slight improvement in the market's judgment on the later demand in the context of RRR cuts, steel traders have started winter storage, and steel stocks have been from steel mills. Transferred to traders, the steel mills have low inventory pressure, strong willingness to price, and support the trend of steel prices.

Profit level affects steel supply

After the policy factors such as heating season limit production exit, industry supply returns to market logic. When the profit is high, the operating rate of the steel mill is increased; when the loss is made, the maintenance or shutdown is scheduled. Compared with the same period of last year, the steel industry is currently at a low profit stage, but steel production is relatively high. In December, the steel output of key steel enterprises totaled 5,31.49 million tons, which was 1.522 million tons higher than the same period of last year. In the later period, if the steel mill is profitable, the output will be maintained, and the loss may reduce production.

Steel prices are hard to rise and hard to fall, low profits or staged sustainability

In the process of shifting supply and demand from tight balance to oversupply, steel prices have fallen and profits have shrunk. At present, steel prices have entered a small shock range, and Shanghai rebar prices continue to hover at 3,800 yuan / ton. Consumption of off-season steel output maintained a high level to curb steel prices; while consumption continued, stocks were low, and winter storage gradually opened up to support steel prices. Under the game between the two sides, steel prices continued to fluctuate. The small drop in raw material prices gave steel companies a profit recovery space. As of January 11, the industry's profitability rose slightly to 71.2%, ending a 7-week decline, and the industry's low profitability or stage continued.

Investment Strategy

At present, the market is pessimistic about the industry's future earnings expectations, and compared with the high profitability in the past year, the industry does have a tendency to reduce profits to a reasonable range, so it is estimated The value reflects the market expectations ahead of the market and falls back to historical lows. From stocks, as of January 1On the 4th, nine steel listed companies have a rolling P/E ratio of less than 4 times and 14 P/B ratios of less than 1. From the market value of steel per ton, Sangang Shuguang (002110, diagnostic stock) participated in the steel production capacity index bidding in November, the corresponding price per ton of steel was 1343.7 yuan / ton, there are a number of listed companies per ton steel market value is lower than this. Under the background of macroeconomic policy adjustment to a proactive fiscal policy and a prudent monetary policy, and the support of real estate and infrastructure for steel demand, as steel prices stabilized, there is an opportunity for valuation to be repaired. It is recommended to focus on listed companies with low debt, low valuation and potential high dividend yield, such as Fangda Special Steel (600507, diagnostic stock), Sangang Shuguang, Liugang (601003, diagnostic stock) and so on.

Risk Warning

The macroeconomic downturn led to a more-than-expected decline in demand at the industry.

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