20180807-广发证券_香港_-China_Pulse_Check__Steel_Sector_6页_848kb

报告摘要

China Pulse Check: Steel Sector Summary

Core Content

This report provides an analysis of the Chinese steel sector, focusing on supply-demand dynamics, pricing trends, and earnings performance as of the first half of 2018. It also includes stock recommendations and potential risks affecting the sector.

Main Points

Demand Trends

Property Investment: Demand growth for property investment in 1H18 slowed by 0.5pp to 9.7% YoY, while GFA new starts and GFA construction increased by 1.00pp and 0.5pp respectively to 11.8% and 2.5%.
Land Area Purchased: Grew by 1.00pp to 7.20% YoY.
Property Development Financing: Grew by -0.50pp to 4.60% YoY.
Residential Area Sold: Grew by 0.40pp to 3.30% YoY.
Fiscal Expenditure: Cumulative fiscal expenditure accounted for 53.18% of the annual budget, up 13.77% MoM and 0.08% YoY.
FAI (Fixed Asset Investment): 1H18 FAI fell by 1.49pp to 4.40% YoY. However, the recent policy measures suggest a more aggressive fiscal stance, which may help FAI rebound.
Manufacturing Investment: Grew by 1.6pp to 6.80% in 1H18 compared to 2H17, driven by strong demand from machinery, auto, and ship manufacturing.

Supply Trends

Crude Steel Output: Increased by 104.3m tonnes YoY to 450m tonnes in 1H18.
Capacity Utilization: June saw blast furnace utilization at 105%, converter utilization at 93%, and electric furnace utilization at 69%.
Production Constraints: The government's stricter environmental policies and production restrictions in Tangshan and Changzhou have started to reduce daily crude steel output.
Supply-Demand Balance: Supply-demand dynamics are expected to remain tight in August.

Pricing Trends

Steel Prices: Diverged in July, with steel prices remaining stable and iron ore prices expected to weaken in August.
Product Price Indices: Long and flat product price indices saw strong increases.
Rebar Futures: Closing and settlement prices of active rebar futures contracts strengthened in July.

Earnings Performance

July Earnings: Earnings for major steel products declined in July.
Average Gross Profit: Rebar at Rmb1,196/tonne, hot-rolled steel at Rmb1,240/tonne, and cold-rolled steel at Rmb913/tonne.

Stock Recommendations

Top Picks for August: SGIS Songshan (000717 CH), Hunan Valin Steel (000932 CH), Xinyu Iron & Steel (600782 CH), Nanjing Iron & Steel (600282 CH), and Baoshan Iron & Steel (600019 CH).

Key Risks

A significant economic downturn.
Steel exports missing expectations.
Production cuts not being enforced as expected.
Coordinated price cuts by major iron ore producers.

Rating Definitions

Company Ratings

Rating	Description
Buy	Expected to outperform the Hang Seng Index by more than 15%
Accumulate	Expected to outperform the Hang Seng Index by more than 5% but not more than 15%
Hold	Expected relative performance between -5% and 5%
Underperform	Expected to underperform the Hang Seng Index by more than 5%

Sector Ratings

Rating	Description
Positive	Expected to outperform the Hang Seng Index by more than 10%
Neutral	Expected relative performance between -10% and 10%
Cautious	Expected to underperform the Hang Seng Index by more than 10%

Key Data Points

Figure 1: 6M18 cumulative FAI growth slightly declined.
Figure 2: 1H18 cumulative industrial value added marginally decreased YoY.
Figure 3: M1 growth edged up in June, while M2 growth slightly declined.
Figure 4: MoM growth in cumulative ferrous metal FAI strengthened, with industrial value-added increasing marginally.
Figure 5: June crude steel daily average output rose significantly MoM.
Figure 6: June crude steel output increased sharply YoY.
Figure 7: 6M18 cumulative property investment growth slowed slightly.
Figure 8: 6M18 cumulative FAI completion growth slowed noticeably.
Figure 9: Long and flat product price indices increased strongly.
Figure 10: Active rebar futures contracts saw strengthened closing and settlement prices.

Disclaimer

This report is for informational purposes only and does not constitute an offer to buy or sell securities. It is intended solely for clients of GF Securities (Hong Kong). The report may not be distributed in jurisdictions where it is unlawful. GF Securities (Hong Kong) accepts no liability for losses arising from the use of this report. Investment involves risks, and past performance does not guarantee future results.

Analyst Certification

The views expressed in this report reflect the personal opinions of the analysts and are not influenced by any remuneration or external factors.

Disclosure of Interests

GF Securities (Hong Kong) and its affiliates do not hold any shares of the securities mentioned in this report.
No investment banking relationship with the mentioned companies in the past 12 months.
Analysts and their associates do not serve as officers of the companies mentioned and have no financial interests in the securities.