东兴首席周观点：2025年第28周-20250711

Investment Rating - The industry investment rating is optimistic, indicating a potential recovery in profitability and valuation levels for the steel industry due to the "anti-involution" policy [1][4]. Core Insights - The "anti-involution" policy aims to shift the steel industry from low-cost homogeneous competition to high-end differentiated competition, which is expected to lead to a reversal in industry profitability and valuation levels [1][4]. - The steel industry is currently facing weak demand, with prices and profit levels declining. The Producer Price Index (PPI) for black metal smelting and rolling industries has dropped to 89.8, the lowest among five sub-industries [2][4]. - The current state of the steel industry shows a divergence in profitability between upstream and midstream sectors, with upstream mining absorbing most of the industry's profits [2][4]. Summary by Sections Current Industry Status - The steel industry is experiencing weak demand, with PPI for black metal smelting and rolling industries at 89.8, indicating a decline in prices and profits [2]. - The gross profit margin for black metal smelting and rolling industries is only 5.48%, significantly lower than the 19.57% margin for black metal mining [2]. Comparison with 2015 Supply-Side Reform - The supply-demand situation in the steel industry has improved compared to 2015, with a reduction in the degree of supply surplus [3][4]. - The current "anti-involution" policy is less administratively forceful than the 2015 supply-side reforms, which were primarily focused on eliminating outdated production capacity [3]. Policy Impact and Guidance - The "anti-involution" policy aims to prevent homogeneous competition and emphasizes the need for market mechanisms and industry self-regulation to optimize and upgrade production capacity [4]. - The policy includes stricter standards for capacity elimination and encourages the adoption of green and intelligent production methods [5]. Inventory and Profitability Outlook - The steel inventory is expected to rise from the bottom, with significant reductions in social inventory levels for rebar and wire rod [6]. - The industry's return on equity (ROE) and return on assets (ROA) have declined due to the real estate market downturn, but the "anti-involution" policy may help restore market sentiment and improve profitability [6]. Valuation Observations - The current median price-to-earnings (P/E) ratio for the steel industry is 35.51X, indicating potential for valuation recovery as supply-demand structures improve [6].