Investment Rating - The investment rating for the company is "Buy" (maintained) [6] Core Views - The company reported better-than-expected performance in the first half of 2025, with total revenue of 63.09 billion yuan, a year-on-year decrease of 16.93%, and a net profit attributable to shareholders of 1.748 billion yuan, a year-on-year increase of 31.31% [6] - The decline in raw material costs has led to a recovery in gross profit per ton of steel, with a gross profit margin of approximately 9.9% in the first half of 2025, up from 6.8% in the previous year [6] - The company has continued to innovate, with 233 new patent authorizations in the first half of 2025, contributing to an increase in the sales proportion of high-end products [6] Financial Data and Profit Forecast - Total revenue forecast for 2025 is 141.486 billion yuan, with a projected net profit of 2.740 billion yuan, reflecting a year-on-year growth of 34.8% [2] - Earnings per share are expected to increase from 0.25 yuan in 2025H1 to 0.40 yuan in 2025E [2] - The company's return on equity (ROE) is projected to improve from 3.2% in 2025H1 to 4.9% in 2025E [2] Market Data - As of August 26, 2025, the closing price of the company's stock is 5.73 yuan, with a market capitalization of 39.586 billion yuan [3] - The company has a price-to-book ratio of 0.7 and a dividend yield of 1.75% [3] Investment Analysis - The company has adjusted its net profit forecasts for 2025-2027 to 2.740 billion, 3.556 billion, and 3.957 billion yuan respectively, reflecting an optimistic outlook due to ongoing industry improvements and product structure optimization [6]

Group 1 - The steel industry is benefiting from favorable policies such as the elimination of outdated production capacity and regulation of low-price dumping [1] - Anticipation of environmental production restrictions in the Beijing-Tianjin-Hebei region due to the upcoming military parade may lead to significant supply contraction, similar to experiences in 2015 [1] - High-end steel products are expected to benefit from the energy cycle and substitution trends, while the ordinary steel sector shows potential for recovery due to favorable policies and reasonable profitability [1] Group 2 - Investors are encouraged to consider the only steel industry ETF (515210) for exposure to steel plate, special steel, and metal products [1] - For those without stock accounts, a linked fund (008190) is available to capture investment opportunities in the steel sector [1]

Investment Rating - The investment rating for the steel industry is "Positive" [2] Core Viewpoints - The steel sector has shown a weekly increase of 1.89%, underperforming the broader market, which rose by 4.18% [10] - The average daily pig iron production reached 2.4075 million tons, reflecting a week-on-week increase of 0.09 thousand tons and a year-on-year increase of 119.8 thousand tons [25] - The five major steel product consumption increased to 8.53 million tons, a week-on-week rise of 21.97 thousand tons, or 2.64% [30] - Social inventory of the five major steel products rose to 10.172 million tons, a week-on-week increase of 26.37 thousand tons, or 2.66% [43] - The comprehensive index for ordinary steel decreased to 3,525.7 yuan/ton, a week-on-week decline of 40.71 yuan/ton, or 1.14% [49] - The report suggests that the steel industry is expected to maintain a stable supply-demand balance, supported by government policies aimed at stabilizing growth in real estate and infrastructure sectors [3][4] Summary by Sections 1. Market Performance - The steel sector's performance was weaker than the overall market, with specific segments like special steel declining by 0.38% and long products increasing by 0.53% [10][12] 2. Core Data - Pig iron production increased to 7.661 million tons, a week-on-week rise of 5.92 thousand tons [24] - The capacity utilization rate for blast furnaces was 90.3%, up by 0.03 percentage points week-on-week [25] - The average daily pig iron production was 2.4075 million tons, reflecting a year-on-year increase of 11.98 thousand tons [25] 3. Inventory - Social inventory of five major steel products increased to 10.172 million tons, a week-on-week rise of 26.37 thousand tons [43] - Factory inventory decreased to 4.238 million tons, a week-on-week decline of 1.30 thousand tons [41] 4. Prices & Profits - The comprehensive index for ordinary steel was 3,525.7 yuan/ton, down 1.14% week-on-week [49] - The profit for rebar production was 67 yuan/ton, a significant decrease of 54 yuan/ton week-on-week [58] - The average cost of pig iron was 2,364 yuan/ton, reflecting a week-on-week increase of 15 yuan/ton [58] 5. Raw Materials - The price of Australian iron ore at Rizhao Port was 770 yuan/ton, down 0.52% week-on-week [72] - The price of coking coal remained stable at 1,630 yuan/ton [72] - The price of first-grade metallurgical coke increased to 1,825 yuan/ton, up by 55 yuan/ton week-on-week [72]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of RMB 17.88, up from the previous value of RMB 17.42 [4][6]. Core Views - The company demonstrated strong resilience in its development, with a slight year-over-year revenue decline of 4.02% to RMB 54.715 billion in H1 2025, while net profit increased by 2.67% to RMB 2.798 billion [1][2]. - The company is focusing on strategic sectors such as wind power, oil and gas, hydrogen energy, pumped storage, and new energy vehicles, which are expected to drive demand for its products [2]. - The steel industry is entering a phase where the urgency and strategic nature of anti-involution policies are being debated, with potential production cuts that could enhance profitability if implemented [3]. Summary by Sections Financial Performance - In Q2 2025, the company achieved revenue of RMB 27.875 billion, a year-over-year decrease of 2.45% but a quarter-over-quarter increase of 3.86%. Net profit for the same period was RMB 1.414 billion, reflecting a year-over-year increase of 3.58% [1][2]. - The gross margin for Q2 2025 was reported at 14.89%, an increase of 1.07 percentage points from the previous quarter [2]. Market Position and Strategy - The company is a leader in the special steel sector, with a strong focus on optimizing its product structure and enhancing quality and efficiency [2]. - The sales distribution of products across various sectors includes 35% in energy, 25% in automotive, 20% in machinery, and 10% in bearings [2]. Earnings Forecast - The earnings per share (EPS) forecast for 2025, 2026, and 2027 is projected to be RMB 1.14, RMB 1.28, and RMB 1.49 respectively [4][10]. - The report anticipates a recovery in profitability driven by potential production cuts in the steel industry, contingent on government policy implementation [3].

Investment Rating - The report maintains an "Accumulate" rating for the company [6] Core Views - The company's Q2 performance continues to be under pressure, but there is optimism for a recovery in the main business and an increase in wet-process business volume in the second half of the year [1][4] - The company achieved a revenue of 2.794 billion yuan in the first half of 2025, a year-on-year increase of 3.57%, while the net profit attributable to the parent company was 69 million yuan, a year-on-year decrease of 48.26% [1] - The report forecasts net profits attributable to the parent company for 2025-2027 to be 300 million, 420 million, and 570 million yuan respectively [1] Financial Performance Summary - In the first half of 2025, the company’s comprehensive gross margin was 17.22%, a decrease of 1.85 percentage points year-on-year [3] - The company’s revenue from functional, shaped, unshaped refractory materials, and other businesses for the first half of 2025 was 627 million, 1.072 billion, 544 million, and 551 million yuan respectively, with year-on-year growth rates of 0.25%, 2.93%, 1.90%, and 10.85% [2] - The company reported a credit impairment loss of 52 million yuan, which was an increase of 37 million yuan year-on-year, primarily due to the bankruptcy of certain clients in Eastern Europe [3] Business Outlook - The report indicates an expected reversal in the main business as the steel industry’s internal competition policies deepen, which may improve profitability for steel clients [4] - The company has signed a strategic cooperation framework agreement with a partner, expecting to supply 500,000 tons of sedimentation agents by the end of 2028, which supports future business volume growth [4]

Group 1 - Steel stocks experienced a broad decline today, with Angang Steel (00347) down 6.01% to HKD 2.19, Maanshan Steel (00323) down 3.95% to HKD 2.43, and Chongqing Steel (01053) down 3.4% to HKD 1.42 [1] - Huatai Securities anticipates that the steel industry's prosperity will improve from Q3 2024 to the first half of 2025 through voluntary production cuts, reducing the urgency for short-term anti-involution measures [1] - Future policies will likely depend on the government's strategic positioning regarding the steel industry's anti-involution approach [1] Group 2 - The increase in the steel sector from January to July 2025 is primarily driven by expectations surrounding anti-involution policies, which have not yet entered the execution phase [1] - Expectations of anti-involution have led to significant increases in coking coal and iron ore prices, further eroding steel profits and potentially forcing steel mills to implement anti-involution measures [1]

Core Viewpoint - The steel sector is experiencing a widespread decline, with major companies like Ansteel, Maanshan Steel, and Chongqing Steel seeing significant drops in their stock prices. The outlook for the industry is expected to improve from Q3 2024 to H1 2025 due to voluntary production cuts, which may reduce the urgency for short-term anti-competitive measures [1] Industry Summary - Steel stocks have fallen sharply today, with Ansteel down 6.01% to HKD 2.19, Maanshan Steel down 3.95% to HKD 2.43, and Chongqing Steel down 3.4% to HKD 1.42 [1] - Huatai Securities anticipates that the steel industry's prosperity will improve through self-initiated production cuts from Q3 2024 to H1 2025, which may lessen the immediate need for anti-competitive policies [1] - The expectation of anti-competitive measures has led to significant increases in coking coal and iron ore prices, which have further eroded steel profits and may compel steel mills to implement anti-competitive measures [1]

Summary of Steel Industry Conference Call Industry Overview - The steel industry has seen a recovery in profitability compared to last year, with total profits of 46 billion yuan in the first half of 2025, still at historical lows, indicating a need for further improvement in profitability [1][2][5] - The PB valuation of the steel sector is slightly above 1x, but given the industry's profit recovery and the elasticity at the bottom of the cycle, the current valuation remains attractive and has investment value [1][2][10] - The holding ratio in the steel sector has decreased further, indicating low market attention and that the industry is still in a bottom cycle, with trading not being crowded [1][2][10] Key Points and Arguments - **Profit Cycle**: The steel industry's profits have improved in the first half of 2025 but remain historically low, only slightly better than 2015 levels, with total profits around 46 billion yuan [2][5] - **Valuation Levels**: Despite the rise in the steel sector this year, the PB valuation is still considered undervalued, with the potential for profit recovery and elasticity from the bottom cycle [2][10] - **Supply and Demand**: Improvements in supply and demand are primarily driven by production cuts and mid-term capacity clearance, with marginal improvements noted from Q3 last year to Q2 this year [2][3][16] - **Short-term Catalysts**: Supply-side reforms under the anti-involution strategy, including production cuts and increased infrastructure work, are expected to positively impact the industry [1][2][3] Future Outlook - The decision-makers aim to enhance the industry's profit center through short-term production control and mid-term capacity clearance, expecting good performance in the steel industry over the next three years [3][19] - The demand for construction steel is expected to remain flat or slightly decrease for the year, while manufacturing steel demand is strong but may face export pressures in the second half [1][15][16] Recommended Stocks - **Hualing Steel**: Lowest PB valuation among quality companies, with continuous shareholder returns expected [4] - **Shougang**: High fixed costs due to relocation, but has significant potential in automotive and silicon steel if the industry recovers [4] - **Baosteel**: Currently undervalued but will benefit significantly from industry recovery [4] - **Fangda Special Steel**: Currently at historical low PB valuation, with potential for growth if production adjustments are made [4] Government Measures - The government emphasizes anti-involution policies to improve the steel industry's situation, with a focus on reducing production to maintain overall profitability [7][19] - The implementation of production reduction policies has been slow, facing challenges particularly with small steel mills [18] Current Production and Supply Situation - The steel industry is experiencing overproduction due to fixed cost absorption strategies, leading to a competitive environment [6] - The overall inventory level is low, with a year-on-year decrease of about 30%, which is favorable for price increases [20][21] Conclusion - The steel industry is currently at a cyclical bottom with significant potential for upward movement. Quality stocks that enhance product value or have strong profit elasticity are recommended for investment [24][25][27]

Investment Rating - The investment rating for the steel industry is "Positive" [2] Core Viewpoints - The steel market is expected to remain strong overall due to ongoing production cuts and favorable demand conditions, despite recent price declines and inventory increases [3][4] - The report highlights that while the steel industry faces supply-demand imbalances, the implementation of "stability growth" policies is likely to support steel demand, particularly in real estate and infrastructure sectors [3][4] - The report suggests that the industry is moving towards a more concentrated supply structure, which may stabilize the overall supply-demand situation [3][4] Summary by Sections Market Performance - The steel sector declined by 2.26% this week, underperforming the broader market, with specific declines in various sub-sectors: special steel down 1.28%, long products down 4.00%, and flat products down 1.80% [10][12] - Iron ore and steel raw materials also saw declines, with iron ore down 5.96% and steel consumables down 3.74% [12] Supply Data - As of August 1, the average daily pig iron production was 2.4071 million tons, a week-on-week decrease of 1.52 tons, but a year-on-year increase of 1.10 tons [25] - The capacity utilization rate for blast furnaces was 90.2%, down 0.57 percentage points week-on-week, while electric furnace utilization increased by 1.56 percentage points to 57.1% [25] Demand Data - Total consumption of the five major steel products was 8.52 million tons, a week-on-week decrease of 161,000 tons, reflecting a 1.85% decline [35] - The transaction volume of construction steel by mainstream traders was 94,000 tons, down 2.07 tons week-on-week, marking an 18.00% decrease [35] Inventory Data - Social inventory of the five major steel products increased to 9.424 million tons, up 152,900 tons week-on-week, but down 25.37% year-on-year [43] - Factory inventory remained stable at 4.095 million tons, with a slight week-on-week increase of 1,000 tons [43] Price Trends - The comprehensive index for ordinary steel was 3,563.9 yuan/ton, down 42.25 yuan/ton week-on-week, while the special steel index increased slightly to 6,629.6 yuan/ton [49] - The profit for rebar production was 200 yuan/ton, a significant decrease of 82.0 yuan/ton week-on-week [57] Raw Material Prices - The spot price index for Australian iron ore (62% Fe) was 770 yuan/ton, down 13.0 yuan/ton week-on-week [70] - The price for first-grade metallurgical coke was 1,660 yuan/ton, up 55.0 yuan/ton week-on-week [70] Investment Recommendations - The report recommends focusing on regional leaders with advanced equipment and environmental standards, as well as companies benefiting from the new energy cycle and high-margin special steel producers [3][4]

Report Industry Investment Rating - The rating for rebar and hot-rolled coil is "volatile" [1] Core Viewpoints - The current steel downturn cycle has similarities and differences with the previous one. The current cycle is more driven by demand decline, with a larger demand drop but a less severe overcapacity issue. The price center is still higher due to increased demand and emerging market demand [2][27][46] - The main policy focus of the previous supply - side reform included capacity reduction, supply control, new capacity control, environmental protection improvement, and price control. However, there were some implementation issues [49][51][56] - Potential supply - side policies for the current "anti - involution" in the steel industry may include promoting ultra - low emission transformation and incorporating the industry into the carbon emission trading market. These are long - term tasks, and short - term over - trading is not recommended. Market turnaround depends on demand recovery [4][78][79] Summary by Directory 1. Comparison of the Current and Previous Steel Downturn Cycles - **Price decline and structure**: The decline time of the current cycle is similar to the previous one. The average price decline of finished products is slightly higher, while the decline of iron ore and coking coal is relatively smaller. The price center is higher than the previous low. The current cycle compresses steel mill profits earlier, and the profit recovers in 2024 - 25 [15][19] - **Demand and overcapacity**: The current cycle is triggered by the decline in real estate demand. The domestic demand for crude steel has been in negative growth since 2021. Although the demand decline is larger, the total demand is on a higher level, and the overcapacity is less severe than the previous cycle [20][27] - **Demand structure**: In the current cycle, the proportion of manufacturing and export demand has increased, playing a role in hedging demand decline. The external demand for manufacturing is strong, supported by overseas demand and emerging market growth. The overseas steel demand also shows a structural increase in emerging markets [28][31][33] 2. Review of the Previous Supply - Side Structural Reform Policies and Market Changes - **Policy background and path**: The previous supply - side reform aimed to solve problems such as overcapacity, high leverage, and real estate inventory. The main policies included capacity reduction (1 - 1.5 billion tons of steel and 5 billion tons of coal), supply control, new capacity control, environmental protection improvement, and price control [47][49][51] - **Market performance**: The steel price performance during the previous reform can be divided into four stages: policy - expectation - driven rise and fall (2015.12 - 2016.4), supply - reduction - driven rise (2016.5 - 2016.12), capacity - reduction - driven profit expansion (2017), and supply - elasticity - increase and narrowing profit (2018 - 2019) [57][61][71] 3. Potential Policy Directions for the Current "Anti - Involution" in the Steel Industry - The current market environment is similar to the previous one, with profit compression and a certain degree of market - based clearance. The priority of promoting supply - side reform this year is not high, but "anti - involution" may be related to anti - deflation [72] - Potential capacity - reduction directions include eliminating blast furnaces below 1000 cubic meters and promoting ultra - low emission transformation in 2026. Supply - control may be achieved by incorporating the industry into the carbon emission trading market, which is a long - term task. Market turnaround depends on demand recovery [73][78][79]