Valin Steel(SZ:000932) 智通财经网·2025-10-24 06:53Core Viewpoint - The steel industry is entering a weak demand season in Q3 2025, with apparent consumption of five major steel products at 155.6 million tons, a year-on-year decrease of 0.9% [1] - Despite expectations of production capacity exit and improved profitability for steel companies, the execution of production restrictions has been below expectations, leading to high iron water levels and rising prices for coking coal, coke, and iron ore, which are eroding profits [1] Industry Overview - The steel industry's key companies are expected to see a slight decline in profitability quarter-on-quarter in Q3 2025, but a significant year-on-year improvement due to a low base in Q3 2024 [1] - The industry is anticipated to benefit from the gradual exit of production capacity and improved supply-demand dynamics, leading to a mid-term recovery in industry prosperity [2] Company Analysis - A total of 19 key companies in the A-share market have a combined market value of 651.75 billion yuan, accounting for 67.2% of the total market value of the Shenwan steel sector [3] - For general steel products, price recovery is evident, but profit erosion due to rising costs from raw material disturbances is significant. For instance, the gross profit margin for long products and flat products is expected to decline by 33 and 29 yuan per ton quarter-on-quarter, while year-on-year improvements are projected at 159 and 454 yuan per ton, respectively [3] - Hualing Steel is expected to achieve a net profit of 740 million yuan, a quarter-on-quarter decrease of 38% but a year-on-year increase of 68% [3] Investment Strategy - The steel sector is viewed as relatively undervalued, with high-quality core assets trading below book value. The trend is expected to outweigh volatility, with a focus on two main investment lines: 1. Long-cycle dimension: undervalued core assets are expected to see valuation recovery, with Hualing Steel being a top pick [4] 2. Short-cycle dimension: production control and capacity exit will have a greater impact on rebar companies, suggesting a focus on efficient companies with a high proportion of long products [4]