The Zhitong Finance App learned that Oriental Securities released a research report indicating that as of December 2023, there were 97 enterprises directly managed by the central government in China, with a total of 12 central state-owned enterprises in the mining, metallurgy, gold, and steel sectors, second only to strong monopoly industries such as energy and power. Among them, the non-ferrous steel sector is an important part of the market value assessment of central state-owned enterprises. In particular, steel and aluminum account for a relatively large share of the market value. It still has great potential in promoting the asset quality of listed companies through mergers and restructuring, resolution of related transaction issues, and increase dividend rates, etc., and is expected to have a leading effect.
It is recommended to focus on the target:
Baowu series: Baosteel Co., Ltd. (600019.SH), New Steel Co., Ltd. (600782.SH), TISCO (000825.SH).
Angang Steel: Angang Steel Co., Ltd. (000898.SZ), Bengang Steel Plate (000761.SZ), Vanadium and Titanium Co., Ltd. (000629.SZ).
Other central state-owned enterprises: Xinxing Foundry (000778.SZ). Leading steel company: CITIC Special Steel (000708.SZ).
In addition, it is recommended to focus on Yunlu Co., Ltd. (000807.SZ) and China Aluminum (601600.SH), which have obvious advantages in production capacity and use of green electricity far exceed the industry average.
The main views of Orient Securities are as follows:
The investment value of listed companies of central state-owned enterprises in the non-ferrous steel sector may increase by benefiting from the market value assessment of central state-owned enterprises
As of December 2023, there were 97 enterprises directly managed by the central government in China, with a total of 12 central state-owned enterprises in the mining, metallurgy, gold, and steel sectors, second only to strong monopoly industries such as energy and power. As of March 3, '24, according to the non-ferrous steel sector in the SW industry, there are a total of 31 listed companies under the central state-owned enterprises. Among them, steel and electrolytic aluminum account for a relatively large market value, and their reform measures and assessment framework are expected to have a leading effect.
Steel: The industry may be undergoing a revaluation. It is recommended to focus on leading enterprises of central state-owned enterprises
Orient Securities believes that from “removing production capacity” to “removing production volume,” the steel industry is facing a new round of mergers and restructuring with policy support. It is expected that in the future, the supply of China's steel industry may be more orderly. The fundamentals of the industry may have improved markedly, and it is time for the steel industry to reassess its value. At the same time, the PB (MRQ) of listed companies of general steel companies is also generally less than 1 times. Leading high-quality steel companies are underestimated, and there is room for future valuation repair. Leading state-owned enterprises are also expected to continue to benefit from this round of mergers and restructuring and industrial restructuring with advantages such as capital and policy.
Electrolytic aluminum: scale advantages have been shown, carbon reduction advantages have been amplified, and the valuation of China Alcoa Shuangxiong is still low
At present, China is nearing the “capacity ceiling” of 45 million tons of electrolytic aluminum. Electrolytic aluminum production capacity is becoming increasingly scarce, and the issue of carbon emissions is getting more and more attention. China Aluminum and Yunlu Co., Ltd. have the highest electrolytic aluminum production capacity. After China Aluminum completed the merger with Yunlu Co., Ltd., the scale and green power advantages were further demonstrated.
Risk warning
The reform of central state-owned enterprises fell short of expectations. There is a risk of a phased rebound in the epidemic. Policy progress fell short of expectations. Risk of macroeconomic disturbances. Changes in assumptions affect the calculation results.