钢铁巨轮，扬帆起航

Investment Rating - The report initiates coverage with a "Buy" rating for Baosteel Co., Ltd. (600019.SH) [2] Core Views - Baosteel, as a leading domestic steel enterprise, has a global leading position in high-end products such as automotive sheets and electrical steel. The company is backed by Baowu Steel Group and has a strong historical profitability, with significant cost reduction potential. The current market valuation is significantly undervalued compared to its replacement cost, indicating substantial strategic investment value [1][2]. Summary by Sections 1. Steel Industry Demand and Structure - The steel industry is entering a stable demand phase with structural adjustments. China's per capita steel consumption is expected to stabilize as the economy matures, with a shift from investment-driven growth to consumption-driven growth [11][20]. - The consumption structure of steel is evolving, with a decrease in investment steel usage and an increase in manufacturing steel usage, reflecting the broader economic transition [20][21]. 2. Company Product Structure and Efficiency - Baosteel's product structure is primarily focused on plate and pipe products, which account for over 90% of its output, aligning with future industry trends. The company ranks first in per ton steel profitability and production efficiency within the industry [1][2]. - The company has significant cost reduction potential through green low-carbon steelmaking and process optimization, which is expected to enhance profitability [1][2]. 3. Short-Cycle Economic Recovery - The short-cycle economic recovery is anticipated to boost capacity utilization rates in the steel industry, with a projected recovery to around 85% in 2024, reflecting a year-on-year increase of approximately 1% [1][2]. 4. Valuation Position and Growth Potential - Baosteel's current valuation is at 0.25 times its fixed asset value, significantly below its historical average of 0.40 times, indicating room for valuation recovery as industry conditions improve [2]. - The company is expected to expand its capacity by over 50% in the next three years, supported by ongoing mergers and acquisitions, which will enhance scale and efficiency [2]. 5. Investment Recommendations - The report forecasts Baosteel's net profit for 2023-2025 to be CNY 12.01 billion, CNY 13.18 billion, and CNY 14.35 billion respectively, suggesting a clear path for profit improvement. The estimated market capitalization based on historical valuation averages is around CNY 234.2 billion to CNY 354.6 billion [2].