TISCO stainless steel (000,825)

 TISCO Stainless Steel (000825)
6.1 significantly the cost of sustainable competitive advantage
main advantage the company purchases of nickel ore on the benefits and economies of scale. Taiyuan Iron and Steel Group and Baosteel Group each hold 10% of the Jinchuan Group equity, the company purchases Jinchuan Nickel has a relatively favorable. If the company sold to Jinchuan nickel price by 1% is equivalent to the corresponding stainless steel products to improve the company (not all) of 0.7% of the gross margin. TISCO Group yearly grade of 64% 600 million tons of ore, 15% discount available to the Company (the overall market commitments: Group is committed to iron ore, pellets offer not less than the first half year China's imports of the same variety, quality products to the shore with an average offer of 15 Customs %. the commitment to December 31, 2010 termination). According to customs statistics, China's iron ore imports in April 2007 the average price of 75.28 U.S. dollars / ton, in January 2007 -4 monthly average price of $ 71.82 / ton. consider to the Group's share of iron ore supplied to the lower grade, we by 70 U.S. dollars / ton, TISCO stainless iron ore a year, can only save the cost of 470 million yuan, the equivalent per-share net of tax 0.10 per return. But we can not find out the number and amount of the actual delivery, it is difficult to confirm the group's actual margin of preference given.
TISCO in technology, equipment, products, size and brand can be maintained longer advantage. TISCO has entered the world three production, R & D strength and a slight gap between Outokumpu and Japan, but have come in the forefront of the world. TISCO stainless steel hot-rolled and cold rolled just put into production, equipment, specifications and technology can lead number years.
6.2 greatly increased the profitability of the overall market after the company's overall market
6.2.1 significant increase in profitability after the IPO the company carbon steel
overall gross profit margin of all the listed steel companies is only the weighted average gross margin of 50 % (Fig. 64), stainless steel, the gross profit margin has been low. the overall market, because of the production chain enjoyed a front-end profit, gross margins have improved quality, and far higher than the industry average. TISCO stainless steel as the most mature of the stainless steel business, its gross profit margin of cold-rolled sheet steel and Baosteel close (product close to) (Fig. 65), we believe that all projects with 150 million tons of stainless steel production and mature, the competitiveness of their products can be further enhanced. In addition , the per capita profit of the industry for the fourth company, behind Baosteel, Wuhan Steel, Anshan Iron and Steel. TISCO stainless steel than the original 5,000 employees, the overall market soared to 22,000 people after, but the steel industry, labor costs have little effect .
6.2.2 a higher proportion of company stock and debt stock accounted for the main business income
than the highest in the industry. the overall market after the expansion of the scope of business, offset by income within the consolidated statements caused a substantial increase in company stock (Figure 66) .2006 TISCO stainless steel stock main business income accounted for more than steel prices in the highest of all listed, 24% (Figure 67), the weighted average of listed companies in the steel industry is 16%.
debt ratio close to the maximum. TISCO first quarter of asset-liability ratio is 66.5%.'s 2006 annual report announced that arrangements for investment of 7.017 billion yuan in 2007, of which 1.335 billion yuan free funds, bank borrowings 1.9 billion, self-financing 3.782 billion yuan .2007 June 5 issue of the Bank approved the company short-term financing bills in batches 40 billion, 15 June 2007 the company issued the first batch of 20 billion yuan short-term financing bonds, the interest rate of 3.65%. As the company is still a large funding gap, we estimate In 2007, bank lending should increase by 20 million, so the company's asset-liability ratio should be about 70%, the industry ranked second (other companies for the first quarter data), the industry average of 57.2% in the first quarter (Chart 67).
6.2.3 interbank assets and related transactions
the overall market after the company and the shares of companies still have to compete with industry assets. To avoid this, the group and share the company reached an agreement to lease and commission processing approach avoiding competition with (Table 6). the company listed in the notice that the whole may be at the right time to further the acquisition of assets of the Group in the same industry.
6.3 main product profitability analysis
6.3.1 profitability of hot rolled products Strong
2006 and 2007 in the first quarter, contributed most of the company's carbon steel profits (Figure 68) .2007 in the first half of plain carbon steel prices have been rising trend, the cost (including ore, freight, coal, scrap, coke, ferroalloy and so on) also significantly increased (before Figure 58, Figure 59). Since all the listed steel companies weighted average gross margin in the first quarter of 2007 and the fourth quarter of 2006 compared to almost no change (before Figure 64), only the iron and steel enterprises have resources slight increase gross margins, but not decreased slightly, indicating that carbon steel is basically the same cost and price increases. Thus, we believe that if the supply of TISCO stainless Group enjoyed a 15% ore discount (price once every six months), then the company's carbon steel, especially in hot rolled coils in the gross profit margin even if the depreciation of new equipment-sharing case (September 29, 2006 150 million tons and cold-rolled steel project has been put into hot-rolled, carbon steel and stainless steel can share the device), it should be no decline or only slightly decreased (Fig. 69).
contribution to the company for most of the profits of the carbon steel, we expect the second half its profitability will be slightly reduced (Figure 70). The first is industrial policy, more bad, bad policies and continue to put great possibility; Secondly, the raw material and fuel prices will not fall; the third is the current price of carbon steel has been loose. carbon steel market outlook, we expect profits will be lower. But because we expect the domestic economy to continue its rapid growth in steel supply are basically balanced, so we think that a sharp decline in profitability of carbon steel are less likely. < br> 6.3.2 profitability of stainless steel while the soaring price of nickel decreased
steel business reported gross margin of all of the company by the fourth quarter of 2006 decreased to 17.84% in the first quarter of 2007, 14.10%, lower 3.74%.
the first quarter of 2007 stainless steel production increased gross margin decline was not offset the impact. a quarter of total revenues increased 17.51%, the company operating profit fell 7.54% qoq. This shows that the relative profitability of stainless steel (gross margin) decreased more (Figure 69), also shows that the absolute profit (gross profit per ton of steel) dropped a lot, because a quarter stainless steel production increased by 50%, and the price chain is also rising.
2007 first quarter net profit increased substantially year on year , but the chain growth is not obvious. Despite the net profit increased by 16.76% qoq increase the amount of 176 million, but this is largely because the first quarter of 2007, management fees less than the fourth quarter of 2006 was 482 million (from can be compared with the last three quarters of view, the first quarter of 2007, a reasonable proportion of management fees, and administrative expenses in the fourth quarter of 2006 increased 314% ring is not normal).
profitability of stainless steel is still hope. With nickel prices regression, with the September 29, 2006 production of 150 tons of stainless steel hot-rolled steel and the growing maturity, and as August 2007 (expected) production of stainless steel cold rolled, stainless steel production and efficiency of the company will further develop . While we expect lower gross profit margin of stainless steel, but stainless steel, carbon steel per ton of steel is 3 times the gross margin (Figure 71) (According to the 2006 Q4 data, the first quarter of 2007 decreased a lot), so the increase in production of stainless steel , or will significantly enhance the company's profitability. In addition, we expect gross profit margin into the stainless steel in 2008 will be better (Figure 70).
6.3.3 plain carbon steel and stainless steel the company a strong international competitiveness, from the front
Figure 64 and Figure 72 shows that under the 2006 fourth quarter (one quarter) the company's gross profit margin was 24.4% carbon steel, the industry average of 14.82%, far exceeding the industry average. also significantly higher than the Anshan Iron and Steel, Wuhan Iron and Steel Baosteel has been listed as a whole and other large steel companies, the highest in the industry first. It shows a certain extent, competitive products, but also shows in the industry downturn, the company greater flexibility in price space. but the company higher gross margin is partly due to the collective benefits provided by the ore.
6.4 The main products of the production forecast
production equipment according to the company's progress in the past year's capacity utilization, and the company's production cuts possible, we The table shows the expected yield (Table 9).
6.5
profit forecast assumes: Our company's earnings forecasts (Table 10) is based on the macroeconomic front, capacity utilization, industrial and export policies, prices (nickel price trend), cost trends, the company based on the analysis of production. on the price forecast is more complicated, because various types of TISCO in the first quarter did not disclose the main income and cost of steel, stainless steel products, so we price forecast is based on similar or the spot price of stainless steel price index to predict the magnitude of the change. As nickel prices fluctuated considerably, and the stainless steel price increase to follow the same basic nickel prices fluctuate, so our future may be the main revenue forecasts due to nickel price The greater fluctuation.
large international steel price-earnings ratio of listed companies, the average dynamic annual average for 2007 and 2008 was 11.3 times, and not very different from each other (Table 11). as well as the characteristics of China's capital market China's steel industry and developed countries in which the different stages of development, we believe that China's steel price-earnings ratio of listed companies can be appropriately higher.
average domestic steel dynamic price-earnings ratio of listed companies in 2007 were 15 times in 2008 and 13 times (after TISCO stainless steel). leading listed company Steel (Angang, Baosteel, Wuhan Iron and Steel), the average dynamic price-earnings ratio for 2007 and 2008, respectively 13 times and 11 times (Table 12). We believe that the leading steel companies steel prices should be relatively small premium rather than the discount. Given the current capacity of TISCO stainless million tons has reached the scale, and the stainless steel production capacity has been among the international top three, so we think that the level of TISCO Stainless the dynamic price-earnings ratio should be in line to lead the company.
6.7 recommended , China from 1994-2007 growth rate of apparent consumption of stainless steel are all apparent steel consumption growth of 1.57 times, we believe that the growth of the stainless steel industry should be about 1.5 times the carbon steel, the valuation levels should be plain carbon steel is about 1.5 times.
TISCO stainless Dynamic PE 2008 should be about 16 times as. with international and domestic steel companies earnings, domestic carbon steel PE listed companies should be more than 12 times The company sales of stainless steel is slightly higher than the carbon steel. weighted average price-earnings ratio of 15 times the company. In addition, as a leading stainless steel companies, the company's industry position and competitive advantage in the industry will be more apparent when problems arise, thus giving the company dynamic price-earnings ratio of 16 times in 2008. forecast earnings per share for three years the company 2007,2008,2009 1.23 yuan, 1.62 yuan, 1.76 yuan, the company within 6 months target price of 25.92 yuan .2007 July 17 closing stock price of 18.94 yuan, from our estimated target price of 36% of the space there to give a