The Company "Breaks" The Threshold Of Valin Steel: The Stock Price Has Risen By Nearly 70% Since February, And The Industry Is Expected To "Reduce The Output"

From the beginning of February, Valin Iron and steel has received 10 rounds of research, which is unique among other steel stocks.

During the period, there was no lack of private equity to say "the reasons for the low valuation of the company and the countermeasures". In this regard, the company can only honestly tell, "the steel industry is a mature cyclical industry, and the market attention is not high Although the company's performance ranks first in the industry, its valuation is significantly lower than the industry average. The performance does not match the valuation, and the company's outstanding performance and undervalued characteristics are prominent. "

Unexpectedly, the company's attention to Valin steel increased sharply, and the stock price also began to "return to value", and rose to 8.56 yuan from 5.04 yuan at the end of January, with the largest increase of 69.8%. Until March 16, Valin Iron and steel just appeared a more obvious decline.

Behind it are the continuous decline of hot group stocks, the rise of steel stocks against the trend, the continuous rise of domestic steel prices and the strong demand of downstream machinery and automobile industry.

More importantly, in early 2016, the solution of steel overcapacity has led to a reversal of the relationship between supply and demand in the steel industry. Now, standing at the new starting point of the "fourteenth five year plan", does the industry have potential policy adjustment expectations in the future? Even, may lead to changes in industry supply and demand?

The reporter of 21st century economic report learned that under the background of reducing carbon emissions, the industry has formed the expectation of reducing steel production. The Ministry of industry and information technology has repeatedly stated that "production capacity and output are double controlled" to ensure that the crude steel output in 2021 will decrease year on year.

The supply side may be weakened, but the terminal demand represented by machinery and automobile is still in the recovery growth from the epidemic.

With one plus one minus, industry expectations change. Mapping to the capital market, is the plate, building materials futures, as well as A-share steel plate staged strong.

"Mature cyclical industry" turns over

The official reply of Valin Iron and steel is in place.

Steel is a mature cyclical industry, which determines the size of the "total plate" and lacks the imagination of incremental space. Because of this, most of the time, steel stocks are ignored by the capital market.

It is difficult to attract market attention without major changes in fundamentals. The last systematic rise of steel stocks can be traced back to the supply side reform started in 2016.

However, in terms of performance since the beginning of 2021, steel stocks have become a rare winner in the secondary market.

In particular, in the new energy, liquor and other groups of plate collective down the environment, the strength of steel stocks exposed. From February 1 to March 15, all 18 liquor stocks of Shenwan fell, with an average decline of 20.06%. Longji shares and Tongwei shares, two leading photovoltaic companies, fell by 23.78% and 32.39% respectively.

On the other hand, steel stocks rose by 20.4% over the same period, while valing steel and Baotou Steel, which returned from the "1 yuan delisting red line", gained more than 60%. Such obvious rotation, just as mentioned in the reply of Valin steel, the company's outstanding and undervalued characteristics are highlighted.

In 2019, Hualing iron and steel once acquired the equity of valing Xianggang, Hualing Lianyuan Steel and valing steel pipe, resulting in an increase in the number of shares after restructuring.

However, even according to the expanded share capital and the performance forecast in 2020, the company's earnings per share after restructuring still reached 1.0279 yuan / share - 1.0605 yuan / share. In other words, before the company's share price rose at the end of January, its valuation was less than five times. Crucially, other steel stocks are facing a similar situation.

Minguang, the third steel group, is expected to earn 1.04 yuan per share in 2020, which is 6.1 times of the estimated value in the same period after conversion; the expected earnings per share of Maanshan Iron and Steel Co., Ltd. is 0.2575 yuan in 2020, and the estimated value after conversion in the same period is 9.9 times

At that time, after the withdrawal of the killing funds from Baotuan stocks, it was necessary to find a new allocation direction. At this time, the steel stocks with undervalued advantage naturally entered the institutional vision.

It should be pointed out that in the process of pulling up the early group stocks, the valuation level between the hot and the unpopular industries has been sharply increased, and has gone to two extremes.

Even, some real estate stocks have a 3.3 times valuation case. Like steel stocks, the share price began to rise and close continuously after the company disclosed the 2020 data.

This case can also provide evidence for the judgment of the above secondary market funds flowing from the high valuation sector to the undervalued industry.

Driven by the demand of machinery and automobile, plate becomes the winner temporarily

Secondary market plate rotation is only on the one hand, the rise of stock prices is also supported by fundamental factors, steel stocks are no exception.

Among them, the core variable is the change of steel price and raw material cost, which directly determines the level of enterprise profit space and profitability.

From the perspective of market evolution since the beginning of 2021, iron and steel enterprises have at least ushered in periodic breathing opportunities.

In the fourth quarter of 2020, iron ore and coke prices continue to rise. Under the pressure of rising costs, steel enterprises passively adjust prices to protect their meager profits. Starting from the beginning of 2021, iron ore prices are stagnant and coke prices are falling rapidly, while steel prices are still rising.

On March 3, the main contract of rebar futures reached a high point of 4924 yuan / ton, equivalent to returning to the price range of "four trillion yuan" in 2009; on the same day, hot coil futures rose above the 5000 yuan / ton level, a new high since its listing in 2014.

"In terms of plates, prices began to rise rapidly in the fourth quarter of last year. On the one hand, driven by demand, the data of infrastructure products increased rapidly in November and December last year. On the other hand, it was also affected by the recent production restriction in Tangshan. The local finished products are mainly hot coil and strip steel, which brings obvious support to the plate East China Sea futures black metal chief researcher Liu Huifeng pointed out.

Through the cost and product pricing model, he calculated the results show that the profitability of iron and steel production enterprises has recovered since the beginning of 2021, in which the profit per ton of hot coil steel has recovered slightly to 150 yuan to 200 yuan / ton in the near future.

In the medium and long term, the domestic and foreign manufacturing industry is in the replenishment cycle of recovering from the epidemic, and the inventory of industrial enterprises is at a low level. At the same time, the driving force of domestic stimulating consumption also forms the demand support for upstream raw materials. "If replenishment inventory can be cashed in, at least the first half of the steel price problem is not big." Liu Huifeng said.

Compared with the downstream demand side, we can also see that the basic surface of the board is obviously higher than that of the building materials.

As far as Valin Iron and steel is concerned, when accepting the organization's investigation, the company pointed out that "under the background of strong demand in automobile, household appliances and construction machinery industries, the degree of order saturation is high".

In contrast, the current prosperity of real estate and infrastructure construction corresponding to building materials downstream is slightly lower than that of machinery and automobile industries, which can be seen from the continuous improvement of sales data of the latter.

Corresponding to the A-share market, the plate enterprises can be regarded as the extension of machinery stocks and automobile stocks, and can also enjoy the dividend of the prosperity of downstream industries.

It is also driven by this logic that the steel enterprises with a high proportion of sheet product income have become the leading varieties, such as Baotou Steel Co., Ltd., Baosteel Co., Ltd. and Xinyu Iron and Steel Co., Ltd., and the growth rate of the listed steel enterprises mainly focusing on pipe materials is obviously lagging behind in the same period.

In contrast, Hualing iron and Steel Co., Ltd. not only accounts for nearly half of the board income, but also is the main supplier of domestic construction machinery giants such as Zoomlion, Sany and XCMG. With the above-mentioned valuation advantages lower than those in the same industry, it finally stands out in the rising market of steel stocks since February.

"Carbon neutral" reshapes industry expectations

The fluctuation of stock price, to some extent, can be regarded as futures investment, that is, the current stock price includes the valuation of the future expectations of all parties in the market.

The above changes in fundamentals and secondary market environment are still limited to the present for steel stocks. Does the collective rise of their stock prices also include the valuation of future expectations?

Otherwise, if only the fundamentals are good in stages, why will it lead to such intensive research among securities companies, public offering and private placement?

In 2016, at the beginning of the 13th five year plan, the domestic steel industry began to de capacity, and completed the target of 150 million tons of steel industry capacity ahead of schedule in 2018. Now, standing at the starting point of the "fourteenth five year plan", do we also face similar opportunities?

This is not impossible, at least in the industry has formed a more clear "production reduction" expectations.

In this regard, the Ministry of industry and information technology has repeatedly made public its position. On February 8, the article "continue to strive forward bravely to open a new journey of high-quality development of the iron and steel industry" published on its official website pointed out, "in 2021, we should deepen the structural reform of the steel supply side as the main line, continue to pay attention to the work of capacity reduction, issue and implement the implementation measures for capacity replacement in the iron and steel industry, and prohibit new steel production capacity. We will study and formulate a work plan to reduce output and implement a policy of dual control of production capacity and output, so as to ensure that the output of crude steel in China will decrease year on year in 2021. "

During the research process of the above institutions, it has repeatedly mentioned that "carbon neutral is a little similar to the supply side reform in 2017. What impact will it have on the pattern of the steel industry and the future development of the company?" "What will steel companies do to reduce carbon emissions in the future?" And so on.

Obviously, institutional investors pay more attention to the potential of carbon neutral on the future operation trend of the steel industry.

"What is uncertain is whether the target of reducing crude steel production can be achieved? What are the specific ways to reduce production? " One possibility, Liu said, is to limit the total amount of pollutants emitted, referring to the experience of Tangshan, an important iron and steel town.

On February 27, Tangshan released the total amount control and emission reduction plan of air pollutants in key industries, taking the iron and steel industry as a pilot to implement the total amount control and gradually promote it. The overall goal is to reduce pollutant emissions by more than 40% in 2021.

"In 2020, the output of crude steel in Tangshan will be 144 million tons, equivalent to the release of output in 2021, only 60% of that of last year. It is estimated that the output will be reduced by more than 50 million tons, equivalent to a 5% to 6% decrease in the national output year on year." Wang Guoqing, director of Lange Iron and Steel Research Center, pointed out.

Of course, the above predicted decrease in output is only an estimate. However, after tracking the recent production changes, Wang Guoqing found that the estimated value of more than 50 million tons was slightly larger from the early data of March, but when the real estate volume dropped in the last two days, it was relatively consistent with this expectation.

In her opinion, steel is the largest emitter next to the power industry. In the context of carbon emission reduction and smelting technology not changed significantly, reducing steel output will be a long-term trend.

As for the specific method, it may be targeted at enterprises that violate environmental protection laws and regulations. For example, enterprises with performance rating of a or B are directly degraded, forcing their production to be more strictly restricted.

It should be pointed out that at present, Tangshan has formed a relatively mature rating system. In March of this year, Tangshan has downgraded the performance rating of 21 enterprises, including multi parent process steel production enterprises and coking enterprises.

The superposition of various factors eventually prompted the steel industry to adjust its expectations.

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