Sangang Minguang (002110): Fujian’s leading steel company expands production capacity and improves long-term profitability

Sangang Minguang (002110): Fujian’s leading steel company expands production capacity and improves long-term profitability

Core point of view Fujian’s steel demand is strong and stable. As a regional leader, the company maintains Fujian Province’s location at the starting point of the “Belt and Road” and is close to Taiwan. The regional economic development prospects are good.

Fujian Province is accelerating scientific development, leapfrogging development, the construction of a free trade zone and obvious advantages over 西安耍耍网 Taiwan. Fujian Province plans to make a large amount of investment in infrastructure, industrial fields, and affordable housing projects in 2019-2020, which will driveThe growing demand for steel in the regional market in Fujian Province provides companies with broad market space and good development potential.

The building materials of the “Minguang” brand are the first brand of building materials in Fujian, with a market share of about 70%.

The profit of the steel industry returns to the market-oriented center, the company’s cost advantage is prominent, the end of the supply-side reform, the pressure of overlapping real estate steel demand is under pressure, and the profit of the steel industry may return to the market-oriented profit center.

From a rhythm perspective, the downward pressure on real estate is expected to be repeated from the second half to the demand side of steel.

Under the trend of profit compression, cost control is still the core competitiveness of steel companies. The company insists on reducing costs through the whole process and improving capital efficiency. Production costs have been at the left end of the domestic steel plant’s cost curve for a long time.

In terms of purchasing capacity indicators, the company’s steel business will grow in the future. After the company completed the acquisition of Sanan Steel, a subsidiary of the group, in 2018, the company’s production capacity expanded, and in January 2019, the company succeeded in increasing its sales volume to 9.

Laiwu Steel ‘s Xinjiang production capacity index (iron: 100-oriented, steel: 100-oriented) purchased at a price of RMB 8.7 billion. In the future, Luoyuan Minguang, a subsidiary of the Group, will be injected into the company. The company’s future crude steel production capacity may approach 1,300 targets, and its medium- and long-term profitability will be further improved.

For the first time, the company that has covered the first level of “overweight” ranks is a leading steel company in the construction steel industry in Fujian Province and enjoys the high steel price bonus brought by the strong demand for steel in the region.

In 2018, the company achieved capacity expansion through the acquisition of San’an Iron and Steel and Laiwu Iron and Steel’s Xinjiang production capacity indicators. The follow-up group Luoyuan Minguang Development injected the company. The company’s steel business continued to grow in the medium to long term, and for the first time, it was given an “overweight” rating.

We estimate the company’s main business income from 2019 to 2021 will be 371.

01, 375.

53, 381.

1.2 billion, net profit is expected to reach 40.

83, 42.

23, 43.

870 thousand yuan, the EPS is 1.

67, 1.

72, 1.

79 yuan / share, the corresponding PE is 4 respectively.

82, 4.

66, 4.

48 times.

Risk warning: domestic and foreign macroeconomic indicators and policy adjustments; construction steel demand is less than expected