The valuation of steel stocks is attractive

The valuation of steel stocks is expected to improve in the two quarter of silver international earnings in the hope of a rebound in real estate construction investment, we believe that the upstream sector of the real estate-steel will benefit greatly, steel prices are expected to moderate rebound, which is conducive to raising the valuation level of steel stocks.　　In addition to the real estate investment rebound, fixed asset investment continued to maintain rapid growth this year, auto production and sales to create a record high, shipbuilding industry, new orders, although still depressed, but the completion of the growth performance is stable, these indicate that the downstream demand for steel gradually to good. Steel prices are expected to rebound gradually in the 2~3 quarter, and iron ore costs with the new contract price is expected to reduce the completion of negotiations, so the two quarter steel industry earnings are expected to gradually improve. At present a A-share steel company 2009 Average Market net rate of 1.6 times times, compared to the past 9 years, the historical average level of nearly 30% discount. We believe that in the recovery phase of the industry, the valuation level of steel stocks should be no lower than the historical average.　　The shares of steel-listed companies will show better performance from 5 to June. China Merchants Securities and steel industry has gone out of the boom trough by 4 trillion investment into the implementation phase and the top ten industrial revitalization plan to pull, domestic demand has picked up; As export tariffs and export tax rebates are expected to fall, exports will also improve; In the second quarter into the consumption season, real estate investment and residential sales rose year-on-year; auto sales hit record highs　　The monthly production of agricultural machinery and common machinery returned to high levels in recent years. It is expected that 5 ~ June construction Steel prices may have 20% to 30% rebound, plate price rebound weak, time lag. The first quarter of the industry, although the loss of profit, but the chain loss face narrowed; the second quarter steel price rebound will lead the rebound in the steel industry profits.　　Driven by multiple positive factors, the steel industry has gone out of the doldrums and is expected to reach or exceed the February boom, maintaining the steel industry "recommended" rating. China's securities boom further rebounded March the national daily output, small steel mills daily output, as well as we calculate the elimination of steel mills and distributors of crude iron daily consumption is more than or close to the highest level of history, which shows that the steel industry demand has been good. and from the industry profit point of view, a sharp rebound in earnings in the first quarter, April steel mills Profit is also on the chain to good, we judge the steel industry's biggest profit "killer"-a large amount of assets impairment losses in the coming period has been difficult to reproduce, the industry has bottomed.　　We consider the valuation of steel stocks attractive. North-East securities performance still has room for improvement the original fuel prices in the two quarter were significantly lower than in the first quarter; steel prices stabilised in the second week of April, after nearly two months of declines, and have risen for 4 consecutive weeks, but the overall gains have been modest. The main factors conducive to further increase in steel prices are: Two quarter is the traditional peak season, the chain demand will have a larger increase; In addition, the total social stock of steel in February after the peak of the second week, continued to fall, conducive to further higher steel prices.　　However, we are concerned that the continued rise in crude steel production in recent months will have a more obvious constraint on the extent of the price increase. Overall,We think the two-quarter price will be flat or slightly higher than the first quarter. With steel prices flat and raw fuel prices falling, two quarterly results will be further improved in the first quarter. Companies with lower original fuel costs may also be better off.