Hesteel (000709) Company Comments: Concerned about the impact of environmental protection and production restriction in the heating season

Hesteel (000709) Company Comments: Concerned about the impact of environmental protection and production restriction in the heating season

Performance summary: The company released the report for the third quarter of 2019, and achieved operating income of 942 in the first three quarters.

9 ‰, an increase of 4 in ten years.

1%; realized net profit attributable to shareholders of listed companies1青岛夜网 7.

8 ‰, a year-on-year decrease of 47%; net profit after deduction is 17.

600 million, a year-on-year decrease of 47%.

The EPS in the first three quarters of this year was 0.

17 yuan, single quarter EPS is 0.

03 yuan, 0.

08 yuan and 0.

06 yuan; third-quarter profit declines sequentially: Although this year, despite the strong real estate pulling demand for steel downstream performance is still solid, due to environmental protection and loosening of production restrictions, alternative production capacity and other factors have led to continuous growth in the industry’s supply side, the industry profit between advance and retreatThe baseline amplitude dropped.

From the perspective of some listed steel companies that have recently disclosed their results, the net profit of many companies in the first three quarters varied by 40% -75%.

The company’s three major production bases are located in production-restricted areas. In 2018, due to environmental protection and production restriction, production was suppressed, costs rose, and performance was dragged down.

With the loosening of production restrictions, the company’s steel output has increased since the beginning of this year, but under the background of the weakening of the industry’s overall supply and demand relationship, crop growth can only replace part of the decline in performance.

In the third quarter, taking into account the cyclical factors of steel companies’ raw material inventory, the impact of the rapid rise in iron ore prices on earnings in June was reflected in July. At the same time, the macro outlook in August was expected to worsen sharply under the dual compression of internal land financing and the gradual expansion of the external environment.The pessimism intensified and the steel price fell sharply, and the company’s third-quarter profit fell 23% month-on-month.

In terms of financial data, bills receivable increased by 92% compared with the earlier period. Basically, firstly, the proportion of bills receivable in sales receivables increased, and secondly, accounts payable adopted other payment methods; long-term extension decreased by 52% earlier, mainly due to overdue repaymentInterest; the asset impairment loss is reduced by at least 100%, in fact, no asset impairment loss has occurred in this period; the asset-liability ratio is expected to decrease: the company issued an announcement on March 11th, intending to issue a ratio of no more than 3 shares for every 10 sharesPlacing by all shareholders, the total amount of funds raised will not exceed US $ 8 billion, and the net amount after deducting the issuing expenses will be used to repay the company’s interest resistance.

The company’s asset-liability ratio has been continuously above 70% for a long time, which is at a relatively high level in the industry, resulting in high financial costs. The asset-liability ratio is expected to drop to 67 through the rights issue.

7%, which helps reduce financial risks and increase profitability.

The company’s application materials for share placement have been approved by the China Securities Regulatory Commission on June 28. Concerned about the impact of environmental protection and production restriction in the heating season: low interest rate environment and low inventory, real estate investment in the fourth quarter remained strong, proactive fiscal policy continued to develop, infrastructure weak recoveryContinuing, on the whole, steel demand under real estate support is worry-free during the year.

In addition, the policy of environmental protection and production restriction for the past year has been tightened recently, the supply side has been controlled to a certain extent, and the profit side of the industry has strived to stabilize and rebound.

Recent studies have found that Tangshan ‘s latest mid-to-late October production limitation plan has been basically included, and the impact of subsequent heating season production limitation on the company ‘s production still needs to be observed. Investment recommendations: The integration of future rights distribution plans will effectively solve the company ‘s long-term assets and liabilities.The problem is that the rate is too high, and the profit level is improved.

The downstream demand of the industry is still stable. The recent improvement in environmental protection and production restrictions has tightened. The supply and demand side is strong. The industry is 南京夜网striving to stabilize its profits. There are opportunities for steel stocks to rebound in the context of macro-recovery.

The company’s EPS for 2019-2021 is expected to be 0.

23 yuan, 0.

24 yuan and 0.

26 yuan, corresponding to PE is 11X, 10X and 10X respectively, maintaining the “overweight” level; risk warning: macroeconomic expectations, supply-side increase risks, environmental protection and production limit risks.