Hua Ling Steel: The main business has not been turning over but obviously improved

Event description Hualing Steel today released 2010 Annual Performance Notice revision notice, is expected to belong to the owner of the parent company in 2010 net profit of 2.5 billion yuan ~-27 billion, to achieve EPS-0.91 yuan ~-0.99 yuan.　　Event comments First, the 4 quarterly results continued to decline in the chain from deferred income tax adjustment.　　Before the company in the 3 quarterly forecast, the full year 2010 to achieve net profit of about 2 billion yuan ~-18 billion, the corresponding EPS is about-0.73 yuan ~-0.66 yuan, of which 4 quarter is expected to achieve EPS about-0.20 yuan ~-0.13 yuan. The company's performance is expected to revise the announcement that the company will not be able to accurately estimate the holding subsidiary of Hualing steel deferred income tax assets in the future can be reversed, the company intends to be the September 30, 2010 cumulative confirmed deferred income tax assets 566 million yuan to be reversed.　　At the same time, the company in the performance of the 3 quarterly forecast will be hualing Lian Steel 4-quarter loss of 200 million yuan deferred income tax assets, is based on the principle of prudence not to mention, the two merged 766 million Yuan, affecting the company's net profit fell directly 766 million yuan.　　Simple estimate, deferred income tax affects 766 million yuan net profit, directly result in 4 quarter EPS drop 0.28 yuan.　　Second, the 4 quarter main did not make a difference, but the chain improvement trend is obvious, increase the price is the main reason. According to the company's revised bulletin, 2010 is expected to achieve EPS-0.91 yuan ~-0.99 yuan, 4 quarter to achieve EPS is about-0.39 yuan ~-0.46 yuan, excluding deferred income tax 0.28 yuan, 4 quarter main business realized EPS about-0.11 yuan ~-0.18 yuan,　　The 3 quarter of the chain-0.38 yuan results significantly improved. From the production point of view, 4 quarters of the month production continued to recover.　　10, November production growth mainly stems from the recovery of the production of Lianyuan Steel, which also with the company to strengthen the management of Lianyuan steel, the December steel production chain slightly decreased, but the production of Xiangtan steel increased significantly, continue to drive total production growth.　　Overall, the 4 quarter of the company's output in the 3 quarter of a more substantial growth.　　While production growth, the 4-quarter domestic market steel prices also rose.　　Over the past 4 quarters of the company's cost of the chain have fallen, may also be a reason for the recovery of performance. Production capacity release brings high growth, high-end variety ratio is expected to further increase the company nearly two new projects and not fully play production capacity, there are still large capacity in the next two years will be gradually released. 2009 the company's annual steel production capacity of 10.69 million tons, 2010-year planned output of 13.45 million tons, and 2011 is expected to reach 16 million tons, production growth mainly from the following aspects: Xiang Steel 5m thick plate project has begun trial production, heavy plate total capacity will reach 5 million tons,　　2011 5m Thick Plate project is expected to release 1.5017 billion tons of production; The 2250 Hot rolling project in Lianyuan Steel is expected to produce 2.4 million tons in 2010 2011 years.On the basis of a further 801 million tons of growth;　　Heng Steel 720 large diameter seamless steel tube In 2011 is expected to reach 15.2 million tons of production.　　Third, 4 quarter improvement, 2011 earnings will be further improved, is expected to turn a profit. In response to the 3-quarter ripple loss phenomenon, the company has taken a series of stringent measures, from the company's bulletin data, although the 4 quarter of the company did not turn a profit, but the trend of improvement is very obvious: strengthen the internal management of Lianyuan Steel: The adjustment of Lian Steel executives, chief executive officer Mr. Caohuiquan was appointed as Lian Steel Executive Director, General Manager, deputy general manager of the company, Mr. Wang Jun was appointed the party secretary of Lian Gang.　　At present, the new management team has taken strong measures to rectify the business order, plug the loopholes in management and strictly administer the factory, and begin to achieve results. New production line supporting the gradual balance: the new production line after running-in, iron, steel, wood technology has been the basic balance, the end of September has been achieved natural labor, Tatsu production.　　After the overhaul of BF and BOF at the end of September, the production level has recovered from the current 500,000 tons/month to 600,000 tons/month, and basically reached the full load production under the existing production capacity; The proportion of long co-mining will increase, strengthen the cooperation of ore purchasing: strengthen the communication and coordination with overseas ore suppliers, improve the long co-mining contract quantity of FMG and South Africa, and the proportion of 2011 old co-ore of Lianyuan steel is expected to be increased from 40% to 65%; at the same time, the company to grasp the iron ore procurement point is not allowed　　Through the headquarters to promote centralized cooperative procurement, the establishment of intensive, optimized procurement system, and strive to make the purchase price to achieve the industry average level;　　Increasing variety development and structure upgrading: ArcelorMittal will send panel experts to provide technical support for new high value-added products such as high-strength steel and deep steel.　　For 2011, with the recovery of the industry, Lianyuan Steel is expected to achieve break-even, and the production of stable Xiang steel is likely to be a major contributor to profitability: Lian Steel: To increase the internal rectification efforts, in 2011, the industry recovery on the basis of the potential to achieve break-even.　　3 quarters of the company's high-priced ore inventory consumption is complete, the company's ore cost has been close to the level of Xiangtan, and 2011-year long co-mining ratio is expected to rise from 40% this year to about 65%;　　The structure of the species continues to escalate in the build-up, and ArcelorMittal will also send experts to assist in the development of high-strength steel and deep steel, which is expected to increase further.　　Management strengthening, Paomaodilou phenomenon is expected to be controlled, cost-side pressure may ease;　　The lack of balance in the production line will be greatly alleviated in 2011;　　Xiang Steel: The stable production and operation of Xiangtan Steel is expected to become a major contributor to profitability, greater performance flexibility.　　Xiangtan Iron and Steel 2010 of the Elderly association accounted for about 60%, 2011 Overall change may be small, the advantages of cost stability continue to maintain;　　With the 5M heavy plate finishing mill in 2011 5-June production, heavy plate product structure is expected to further improve, improve profitability; Rough estimate,With 2 million tons of production capacity of 5M heavy plate production, is expected to release 2011 production of about 1.7 million tons.　　It is assumed that the output of Xiang Steel in 2011 is 7.5 million tons, and the profit of Ton steel is 50 yuan, the contribution EPS is 0.14 yuan, if the ton steel profit is 100 yuan, the contribution EPS is 0.27 yuan, the performance elasticity is bigger. Maintain the "prudent recommendation" rating of the company 2010, 2011 EPS, respectively, 0.97 yuan and 0.16 yuan, to maintain a "prudent recommendation" rating.