ResultsReview
1Q26resultsmissourexpectationsValinSteelannouncedits1Q26results:Revenuefell2.7%YoYtoRmb29.41bn(+10.2%QoQ),andnetprofitattributabletoshareholdersfell64.8%YoYtoRmb198mn(+96.1%QoQ).The1Q26resultsmissedourexpectations,dueto:1)Anarrowingpricespreadbetweensteelpurchasesandsales;and2)theoverhaulsatsteelmakers.
1)Thepricespreadbetweensteelpurchasesandsalesnarrowed;profitabilityweakened.Grossmarginfell2.8pptYoYand3.5pptQoQto6.3%in1Q26,mainlyduetofallingsteelpricesandvolatilerawmaterialprices.
2)Overallexpenseratiodeclined.In1Q26,theexpenseratiofell0.73pptYoYto5.4%,withthefinancialexpenseratiofalling0.14pptYoYto-0.05%,mainlyduetofallinginterest-bearingliabilitiesandrisinginterestincome.
3)Cashflowfluctuatesintheshortterm;assetqualityremainssolid.In1Q26,operatingcashflowwas-Rmb1.65bn,mainlyduetofallingprofitandlowerdiscountedbills.Monetaryfundsincreasedby26%YoYtoRmb12.73bn.Thedebt-to-assetratiofell2.1pptYoYto55.13%.
Trendstowatch
Earningstoimprovein2Q26duetogradualrecoveryacrosstheindustry.Weestimatethatblastfurnacerebarcontinuestoincurnetlosses(-Rmb69/t)giventhelatestprices.Thatsaid,netlosseshavenarrowedquarter-on-quarter.Amongthe247steelmillsmonitoredbyMysteel,49.8%aregeneratingearnings,withtheproportionofprofit-makingsteelmillsincreasingmoderately.
Meanwhile,apparentdemandforsteelcontinuestorecover,inventoriessteadilydecline,andsupplyanddemandmarginallyimprove.Sectorearningsareatlowlevelsduetorisingrawmaterialpricesandweakdomesticdemand.
Lookingahead,weexpecteasingcostpressureandtheimplementationofanti-involvementpoliciestosupportagradualrecoveryinsectorvaluationsandearnings.
High-endstrategyispayingoff.Thecompanycontinuestoimproveitshigh-endproductportfolio.
Siliconsteel:Thefirm'ssiliconsteelproductionlineturnedprofitablein2025.Weexpectitssiliconsteeloutputtocontinueincreasingin2026.Siliconsteelmaybecomeanimportantearningsgrowthdriverforthecompany,inourview.
Automotivesheets:Thefirmcontinuestoimproveautomotivesheettechnologies.RelyingontheVAMAJVplatform,thecompanymayutilizeArcelorMittal'slatestgenerationofhigh-strengthsteeltechnologies(e.g.,Ductibor?1500andFortiform?).WeexpectthePhaseIIIprojecttostrengthenthefirm'sleadingpositioninlightweightmaterialsfornewenergyvehicles(NEV).
Capexandfreecashflow:Capexpeakhaspassed,andfreecashflowmayimprove.Withthecompletionofultralowemissiontransformation,thefirm'scapexhasfallenafterpeaking.Weareupbeatonitsdividendpayoutabilityandshareholderreturns.
Financialsandvaluation
Wekeepour2026and2027attributablenetprofitforecastsatRmb3.4bnandRmb3.82bn.Thestockistradingat9.9x2026eand8.8x2027eP/Eand0.6x2026eand0.6x2027eP/B.Giventhecontinuousdevelopmentofthefirm'shigh-endstrategy,wemaintainanOUTPERFORMratingandourtargetpriceofRmb7.6.OurTPimplies15.3x2026eand13.6x2027eP/Eand0.9x2026eand0.9x2027eP/B.OurTPoffers54%upside.
Risks
Fallingdownstreamdemand;disappointingexporttradeand/orpolicyimplementation.
【免责声明】本文仅代表第三方观点 ，不代表和讯网立场。投资者据此操作，风险请自担。 （
