CITIC Steel(SZ:000708) HTSC·2025-04-21 01:35Investment Rating - The report maintains a "Buy" rating for the company with a target price of RMB 17.42 [6][4]. Core Views - The steel industry shows slight improvement in profitability, with the company reporting a year-on-year revenue decrease of 5.59% but a net profit increase of 1.76% in Q1 2025 [1][2]. - The decline in raw material prices, including hot-rolled coil, iron ore, and coking coal, has been greater than the revenue decline, which supports profit recovery for the company [2]. - The government is taking measures to control steel production to prevent excessive competition, indicating a potential for supply-side optimization in the industry [3]. Summary by Sections Financial Performance - In Q1 2025, the company achieved revenue of RMB 26.84 billion, a decrease of 5.59% year-on-year, but an increase of 4.44% quarter-on-quarter. The net profit attributable to shareholders was RMB 1.384 billion, reflecting a year-on-year increase of 1.76% and a quarter-on-quarter increase of 7.31% [1]. - The gross profit for Q1 2025 was RMB 3.71 billion, up by RMB 211 million year-on-year, while operating expenses were approximately RMB 2.034 billion, slightly lower than the previous year [2]. Industry Outlook - In 2024, China's crude steel production was 1.005 billion tons, with apparent consumption at 892 million tons, indicating a significant oversupply in the market. The profitability rate for 247 steel companies was only 53.7% as of March 2025 [3]. - The report highlights a substantial opportunity for domestic substitution in the special steel sector, with 255,500 tons of special steel imported in 2024, valued at USD 5.248 billion, suggesting a strong growth potential for the domestic special steel market [3]. Valuation Metrics - The earnings per share (EPS) forecast for 2025 is RMB 1.14, with projected PE ratios of 15.3X for the company compared to a sector average of 12.7X [4][11]. - The company’s market capitalization is approximately RMB 59 billion, with a closing price of RMB 11.69 as of April 18, 2025 [7].