Steel industry "two times to inventory" still heavy road

Despite a sharp increase in steel production in the first quarter, demand has not been substantially warmer, and many steelmakers are under heavy pressure to inventory two times after they went to inventory in the four quarter last year.　　However, the current steel price has been at the bottom of the area, the downward space is limited, can be arranged in advance to two times to inventory reaction faster enterprises. Yang Zhenyu Wang Hua Spring industry general loss 2008 years of iron and steel plate to achieve total operating income of 1,180,950,000,000 yuan, an increase of 23.9%, gross profit margin of 9.7%, the year-on-year decrease of 4.1%; To achieve the ownership of the parent company's net profit of 21.11 billion yuan, the year-on-year decline of 61.2%.　　In the first quarter of 2009, the steel plate realized the total operating income of 200.32 billion yuan, down 27.1%, the gross profit margin is only 2%, after deducting expenses and fair value change, the steel plate overall loss, net profit is 4.56 billion yuan, the year-on-year decline is 129.7%. According to the China Iron and Steel Association statistics, China's steel industry sales in the first quarter of 449.99 billion yuan, down 22% from the same period, to achieve overall profit loss of 3.31 billion yuan, and the first quarter of last year the steel industry to achieve a profit of 44.16 billion yuan.　　Although the lack of specific financial data, but we think, compared to the loss of 5.26 billion yuan listed companies, private enterprises and small iron and steel enterprises by virtue of its flexible mechanism, the overall profitability in the first quarter better than large steel enterprises. Two times to inventory different from the beginning of the year, due to a large number of small and medium-sized steel production of the full load, to a large extent offset the production of large steel mills, steel prices in the production-recovery repeatedly in the continuous exploration, although the first quarter of steel production increased sharply, but the real demand has not been substantially warmer, many steel companies in the past four quarters of last year to inventory　　, and faced with two of times to the heavy pressure of inventory, and a quarterly data show that enterprises in two times to inventory the operating conditions of large differences. 2009 Quarterly data show that 32 listed companies, in addition to Baogang operating income growth of 9.7% per cent, other enterprises, the operating income and net profit of the year-on-year decline, of which half of the enterprise losses, total loss of 5.26 billion yuan. From the gross margin of sales, the first quarter of Jinan steel, horse steel shares, China, Liugang shares and South Steel shares are negative, this is mainly because of the first quarter of the price of heavy plate fell in front, and the enterprise high inventory more; Long power shares, Daye special steel, Hangzhou steel shares, Fushun special steel,　　Xining Special steel and other shares in the first quarter gross profit margin than 08 lower overall gross profit margin, which Daye special steel and Nansteel shares in the second half of 2008 to adjust product sales and inventory management mechanism to rapid response to the market. From the first quarter of the ratio of assets and liabilities, Baosteel shares, Baotou Steel, Daye special steel and other enterprises in the asset-liability ratio of the 2008 annual report revealed a slight decrease in the ratio of assets and liabilities. Most enterprises in the first quarter inventory/total assets ratio decreased at the end of 2008, of which Angang shares, Xining Special steel, Shougang shares, Pangang Steel vanadium, Chengde vanadium and titaniumThe ratio of stock/total assets to hualing steel is small, the Great Wall shares, South Steel shares, Guang Steel shares, Baotou steel stock/total assets ratio is large, that is, inventory accounted for more; from the inventory turnover rate, small steel enterprises in the inventory turnover generally faster than large enterprises, of which 2008 inventory turnover before the top four were Shougang shares, Laiwu Steel shares, long force shares, Hangzhou Steel shares and Chengde vanadium titanium.　　Policy support helps industry recovery May 4, "21st century Economic Report" reported, from the National Development and Reform Commission learned that in 2009 energy conservation and emission reduction of the eight key work, promote industrial structure optimization upgrade, the elimination of electricity (shutdown small thermal power units), iron, steel and other industries backward production capacity was ranked first. To ironmaking industry, for example, 2009 obsolete production capacity of 10 million tons, to 2011, the elimination of backward ironmaking capacity of 72 million tons, three years will accumulate 100 million tons.　　To this end, the National Development and Reform Commission will be the elimination of backward production capacity to set up a special inspection team, regularly to the land, finance, environmental protection, industry and commerce, quality inspection and other gateway departments to notify the elimination of backward enterprises list. The recent provincial steel revitalization planning has been introduced. According to Shanxi Province planning, by 2011, the province's steel enterprises will be reduced from the current more than 200 to 50, Taiyuan Steel group capacity reached 20 million tons, Hebei province planning in 2011 to complete the scale of contraction and product optimization adjustment of the basic tasks. 2011, more than 5 million tons of large-scale steel enterprises to achieve more than 5; Shandong province planning to Rizhao Steel boutique base as the core of the provincial steel industry structure adjustment.　　Through the elimination of backwardness, merger and relocation measures to accelerate the transfer of inland steel capacity to coastal areas. Ministry of Industry requirements, in the downstream sector has not fully recovered, the steel industry must be the total amount of control as the current top priority. Iron and steel enterprises to strengthen production and need cohesion, adhere to the "No contract production, below the cost of production, not to pay the goods do not." In addition, all over the strict implementation of investment management provisions, prohibit unauthorized approval of new steel projects, are illegal construction will also stop construction.　　At present, relevant departments are speeding up research and development of "iron and steel industry adjustment and revitalization plan" supporting policy measures. It is worth mentioning that from the second half of 08, Fujian Province already has 4 steel enterprises, including Liyuan St., began to invest in Yunnan, Yemen, Kazakhstan, Indonesia and set up factories. Enjoy the first 3 years of tax exemption, 5-9 years only levy 5% of the taxes, 第13-15 years, its tax rate is not 15%.　　This also helps the industry to adjust and realize industrial transfer. 2009 Interim Performance Forecast statistics so far a total of 22 enterprises issued in the announcement of the performance of the notice, are in advance or deficit, compared to the first quarter of the parent company's shareholders net profit and Year-on-year growth rate, three steel min Guang, Ling Steel shares and long-term strength of the shares two quarterly results are expected to improve. Looking for fast responders to inventory the recent iron and steel industry has a more positive signal: (1) The recent steel plate price adjustment information, cut prices of varieties significantly reduced, some steel companies also raised rebar prices. (2) macro-economic indicatorsShow warmer: The first quarter, the social fixed assets investment growth of 28.8%, faster than the same period last year and the whole year; The PMI index rebounded for four consecutive months, with the PMI index exceeding 50% to 52.4% in March. (3) Domestic investment will gradually exert strength, the two-quarter infrastructure will enter the peak construction. We believe that under the influence of many positive factors, steel City may have bottomed out, but the current macroeconomic situation is still complex, the demand for steel downstream of the greater uncertainty, in addition, the protracted iron ore negotiations results have important impact on the industry.　　However, the current steel prices have been at the bottom of the area, the downward space is limited, after the completion of the steel price will appear trend of rebound, steel stocks can be laid out in advance. According to the relevant statistics, the history of the steel industry, the average PB about 1.58 times times, the current steel industry PB about 1.55 times times, we believe that the steel plate has a certain margin of safety.　　At present, Anyang Steel shares have fallen below net assets, in addition, Baosteel shares, hualing Steel and other enterprises have a higher margin of investment safety. We propose to focus on two types of enterprises: (1) to inventory the rapid reaction, large high-quality enterprises such as Baosteel shares, Wisco shares and Angang shares, small and medium-sized steel enterprises such as Daye special steel, Hangzhou steel shares, Hualing Steel, (2) according to the trend of steel prices in the current period, the construction of steel showed signs of stabilisation,　　We believe that the 09 construction of steel relative to other varieties will be faster recovery, the beneficiary region to revitalize the construction of steel production enterprises are expected to be the first to achieve profitability, such as Army Day steel, three steel min light, Ling Steel shares. Author Unit: Japan Letter Securities