20171031-招商证券_香港_-鞍钢股份-00347.HK-Expect_bullish_4Q17_on_plate_product_advantages_6页_1mb

报告摘要

Angang Steel (347 HK) Company Report Summary

Core Content

This report provides an analysis of Angang Steel (347 HK) for the period ending October 31, 2017, with a focus on its financial performance, earnings outlook, and investment ratings.

Main Points

3Q17 Financial Performance

Revenue: RMB21.4bn, up 37.4% YoY
Net Profit: RMB1.46bn, up 116% YoY
1-3Q Net Profit: RMB3,285mn, equivalent to 71% of the adjusted 2017E earnings
Earnings per share (EPS): RMB0.64, up significantly from RMB0.22 in 2016

4Q17E Outlook

Steel Prices: Expected to be stronger than raw materials due to weak demand and low production rates
Plate Products: Expected to benefit from increased demand in autos and home appliances
Earnings Growth: We lifted 2017-19E net profit estimates by 20-22%, to RMB3.81/3.9/4.28bn
Target Price (TP): Raised to HK$8.03, implying a 10.7x/1x 2017E PE/PB

Risk Factors

Potential oversupply due to less strict production curbs during the heating season
Environmental policies may not significantly improve in North China, affecting PM2.5 levels

Key Financials (RMB mn)

Item	2015	2016	2017E	2018E	2019E
Revenue	52,759	57,882	91,384	94,144	96,027
YoY Growth (%)	-28.7%	9.7%	57.9%	3.0%	2.0%
Net Profit	-4,593	1,616	4,624	4,747	5,132
YoY Growth (%)	-594.9%	N.A.	186.1%	2.7%	8.1%
EPS (RMB)	-0.64	0.22	0.64	0.66	0.71
DPS (RMB)	0.00	0.07	0.07	0.11	0.12
P/E (x)	-8.91	25.36	8.85	8.62	7.97
P/B (x)	0.94	0.90	0.83	0.76	0.70
ROE (%)	-10.5%	3.6%	9.3%	8.8%	8.8%

Earnings Estimates and Adjustments

Earnings Forecast Adjustment (RMB mn)

Item	New Assumption	Old Assumption	Change (%)
Revenue	91,384	88,670	3%
Gross Profit	11,003	9,881	11%
Net Profit	4,624	3,811	21%

12-Month Target Price

Item	Previous	New	Potential Upside
Price	HK$6.84	HK$8.03	+17%

Sector and Peer Comparison

Sector: Steel

Hang Seng Index: 28,439
HSCEI: 11,644
52-week range (HK$): 3.91-7.71
Market Cap (HK$ mn): 7,427
Avg. Daily Volume (mn): 17.45
BVPS (HK$): 6.39

Peer Comparison (Selected)

Company	Ticker	Rating	Price (HK$)	TP (HK$)	Mkt Cap (mn HK$)	2017E P/E	2018E P/E	2017E PEG	2017E P/B	2018E P/B	2017E ROE	2017E Net Gearing
CREC	390 HK	NEUTRAL	6.39	6.16	224,413	8.30	7.58	0.96	0.77	0.71	9.8%	10.7%
CRCC	1186 HK	NEUTRAL	9.89	12.56	183,094	7.26	6.60	1.03	1.03	0.96	12.2%	Net cash
CCCCC	1800 HK	BUY	9.78	11.47	254,533	7.49	6.83	0.65	0.92	0.83	9.8%	83.8%
Angang	347 HK	BUY	6.64	8.03	52,029	8.85	8.62	1.65	0.83	0.76	9.3%	48.8%

Investment Rating

Industry Rating: OVERWEIGHT (expect sector to outperform the market over the next 12 months)
Company Rating: BUY (expect stock to generate 10%+ return over the next 12 months)

Analyst and Regulatory Information

Analyst Disclosure: The analysis reflects the personal views of the analysts and is not influenced by compensation
Regulatory Disclosure: Refer to the important disclosures on the CMS HK website
Disclaimer: This document is for information purposes only and should not be construed as investment advice. It is not directed at all investors and may not be suitable for everyone. The information is current as of its publication date and may change without notice. Past performance is not indicative of future results. Estimates are based on assumptions and may not materialize. Investors are advised to make their own decisions and seek independent financial advice.

Additional Insights

Inventory Trends: Social inventories of rebar fell slightly in October, while inventories of coke and iron ore increased significantly
Profit Margins: Profit margins for rebar, HR coil, and CR coil remain near YTD highs
Environmental Impact: The Tangshan PM2.5 Index suggests environmental policies are likely to persist

Conclusion

Angang Steel is expected to show strong earnings growth in 4Q17, particularly from plate products, with increased demand in the automotive and home appliance sectors. The company's financial performance has improved significantly, with a raised target price and a BUY rating. Despite potential risks from production curbs and market oversupply, the outlook remains positive due to the continued strength in steel prices and weak raw material prices. The company's financial ratios and valuation metrics suggest a favorable position within the steel sector.

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