Iron and steel industry: revaluation of M&A value
1 Urbanization and industrialization are the internal driving forces for the development of iron and steel industry in China. It is predicted that the iron and steel industry in China will develop more healthily during the 11th Five-Year Plan period, especially after this round of adjustment.
The external driving forces of investment opportunities in steel industry in 2006 are: 1) The deterioration trend of steel industry fundamentals has been reversed; 2) The trade-off between cyclical risks and the profitability of the company will be reconsidered by the market; 3) The enthusiasm of foreign M&A will increase the market value of domestic steel enterprises.
3. The product structure of Baotou Steel is diverse, and the products with strong risk resistance such as heavy rail seamless steel pipe plate.
In the next few years, the company will be able to maintain stable profits. With the commissioning of cold rolling projects and large profile projects, the company's profitability will continue to improve, and the strong background of the company's major shareholders will provide imagination for the company's development.
5. Company reform plan 10 gives 10.6 shares and subscription put warrants each give 4.5 shares or10 gives 3.3 shares, and its share delivery ratio and share delivery rate are at the leading level in all listed companies and steel industry.
Iron and Steel Industry: Developing in Adjustment
Since April, 2005, steel prices have been falling continuously, and the voice of oversupply and overcapacity in the steel industry is getting louder and louder. Judging the future development trend of iron and steel industry will become the primary problem of iron and steel investment decision-making. We believe that the current development of the steel industry is the coexistence of adjustment opportunities and risks in the long-term growth.
The power of industrialization in developing countries
From the history of world steel development, we can find that the world steel industry is developing in adjustment, and industrialization and urbanization are important driving forces for the development of the world steel industry.
Since 2000, the world steel industry has changed the stagnant development situation in the previous 30 years and entered a stage of rapid development. From 2000 to 2005, the average annual compound growth rate of apparent steel consumption reached 7.8%.
The main reasons are as follows: after industrialization entered the post-industrial era, the consumption growth of steel in developed countries did not shrink but remained at a high consumption level. At present, the per capita steel consumption of major developed countries in the world is 400 ~ 500 kg; The rapid growth of steel consumption in developing countries such as China, India, Brazil and Argentina, which have entered the stage of industrialization, has injected new impetus into the development of the world steel industry.
Industrialization is an insurmountable stage of development for any country. The industrialization of developing countries will make the world steel industry at least prosperous 10 ~ 15. The alternate progress of countries at different stages of development will promote the sustainable development of the world steel industry.
Building a Harmonious Society and Promoting the Development of China Iron and Steel Industry
The Fifth Plenary Session of the 16th CPC Central Committee outlined the blueprint for China's economic development in the next few years, and also pointed out the direction for the development of China's iron and steel industry. On the basis of optimizing the structure, improving efficiency and reducing consumption, the per capita GDP in 20 10 is doubled compared with that in 2000, which is higher than the previous requirement of the central government to double the GDP in 10. At the same time, it is proposed to achieve harmonious development and achieve * * *. The implementation of these policies is conducive to expanding consumption, accelerating economic growth and maintaining stable and rapid economic development. This is a big principle that we must always grasp. The essence of Scientific Outlook on Development is to achieve rapid and good development, and the key to solving all problems in China lies in development. Therefore, the overall situation of industrialization, urbanization and internationalization has established a good external environment for the development of China's iron and steel industry and provided a broader demand space for the consumption of China's iron and steel industry.
The average annual economic growth rate of 7.5% during the Eleventh Five-Year Plan period is lower than that of 8.8% during the Tenth Five-Year Plan period. At the same time, it is required to change the mode of economic growth, which may reduce the consumption elasticity of steel. In recent years, the consumption elasticity coefficient of steel has been high, which was 2.5 1.762003 in 2004 and 1.03 in 2004. Based on this, it is estimated that the steel consumption growth is expected to remain at 60 during the 11th Five-Year Plan period.
The change of steel consumption is closely related to the change of fixed assets investment, and it is inevitable that the growth rate of fixed assets investment will drop. In recent 65,438+06 ~ 20 years, it is considered that the growth rate of fixed assets is moderate, which is obviously lower than the average annual growth rate of fixed assets investment of 25% in recent years. However, for a total investment with fixed assets investment exceeding 8 trillion, the absolute amount of steel consumption is still very huge.
Foreign capital merger and acquisition promotes domestic integration
In 2005, the process of multinational iron and steel giants rushing to China was obviously accelerated, but on July 20, 2005, the State promulgated the Iron and Steel Industry Policy, which stipulated that in principle, iron and steel enterprises were not allowed to hold foreign shares.
After Mittal, the global steel giant, spent 2.8 billion yuan to acquire a 36.67% stake in Valin Pipeline (000932), ArcelorSteel Group, the second largest steel giant in the world, plans to acquire Laigang. At the end of February, Laiwu Steel Group plans to transfer 350 million shares of state-owned legal person (accounting for 3.84 1% of the company's total share capital) to Arcelor China Holdings (Luxemburg) Co., Ltd. at a transfer price equivalent to 2.086 billion yuan.
Internationally, Mittal proposed in London on October 27th, 65438186 billion euros (US$ 23 billion) to acquire its rival Arcelor (the largest steel group in Europe) to further consolidate its position as the largest steel enterprise in the world. 65438129 October, Arcelor's board of directors rejected Mittal's takeover proposal and called it a "malicious" takeover.
Arcelor is a joint venture of France, Luxembourg and Spain. Headquartered in Luxembourg, Arcelor mainly produces steel plates for automobiles in Europe. The company's business is concentrated in Europe and Latin America, and the company is famous for producing high-end steel products.
If Mittal and Arcelor merge, they will become the most powerful steel enterprise in the world. According to preliminary estimates, the annual sales of the new company will reach 69 billion US dollars, the total number of employees will exceed 25, and the output of Wan Gang will exceed 65,438+1100 million tons, accounting for 12% of the global steel market.
This is the largest acquisition in the international steel industry, surpassing Mittal's acquisition of LNM Holding Company in 2004 with US$ 654.38+058 billion.
As soon as the news came out, Arcelor's share price soared by 7.43 euros to 29.65 euros, an increase of 33%. At present, Arcelor's share price has reached 3 1 euro per share.
It is an indisputable fact that industrialization and urbanization in China will promote the growth of steel consumption and the long-term growth trend of steel consumption in China in the future. Recently, the overcapacity of China Iron and Steel is a relative surplus of production capacity and demand, and the high value-added steel of escape sequence still needs to be imported. In 2005, the total steel imports exceeded 25 million tons. Attracting foreign capital can improve the technical level of China enterprises, and with the entry of foreign capital, it will have a positive impact on the technical level and structural adjustment of the steel industry.
Structural adjustment is conducive to sustainable development.
In the face of falling steel prices, a considerable number of people think that the steel industry has overcapacity, and supply exceeds demand, but we believe that overcapacity cannot be exaggerated.
The demand for steel is rigid, and the current situation is that the demand growth rate is still very fast. The main problem is that production is growing faster than demand.
The analysis of oversupply should not only see the quantity, but also see the structural connotation behind the quantity.
It is inaccurate to judge that the sum of the production capacity under construction and the planned production capacity greatly exceeds the demand, because it means that industrial policies cannot control the elimination and all retention of backward equipment; The threshold set by industrial policy can't control the completion of the proposed projects, and some projects under construction and proposed projects have been stopped or postponed due to the drop in steel prices.
Iron and steel production consists of furnace charging, ironmaking, steelmaking, steel rolling and other production processes. The production capacity of any link does not match and cannot be released, which belongs to invalid production capacity. Therefore, when analyzing the market supply situation, it is necessary to eliminate the invalid capacity in order to grasp the real situation of the new effective capacity.
In order to solve the problem of overcapacity in the steel industry, the National Development and Reform Commission issued the Notice on Controlling the Backwardness of the Steel Industry and Accelerating the Structural Adjustment, and then the State Council issued and implemented the Interim Provisions on Promoting the Industrial Structural Adjustment. At the same time, the National Development and Reform Commission issued the "Guidance Catalogue for Industrial Structure Adjustment", which clarified the restrictions of the steel industry, including 14 elimination category and 30 elimination categories, and put forward a specific elimination schedule, in which it was clearly proposed to control the steel production capacity during the Eleventh Five-Year Plan period and eliminate the backward ironmaking production capacity of 654.38+billion tons.
From the international experience, it is a normal value that the steel industry's capacity utilization rate reaches 70%, while China's steel capacity utilization rate is not only 1 1,000%, and the overcapacity of enterprises in the case of product shortage has also become the same goal pursued by enterprises.
With the steel market from hot to low, the strategic focus of steel enterprises will change from maximizing output to maximizing value. Therefore, measures such as structural adjustment and industrial upgrading will be taken, and the output growth rate of the steel industry will gradually decline.
At the same time, from the perspective of fixed assets investment sources, the growth momentum of fixed assets in the steel industry is also insufficient. We predict that the investment in fixed assets in the steel industry will drop by 20% in 2006.
The Company's Competitive Advantage: Unique Resources
1 cost advantage
The total proven iron ore industrial reserves in Baiyun Obo, the raw material producing area of the company, are 6,543.8+255 million tons, which provides iron ore guarantee for the company's sustainable development. The total reserves of various coal resources in western Inner Mongolia are nearly 300 billion tons, and the transportation conditions are good. In recent years, extremely rich natural gas resources have been discovered, and it is adjacent to Shanxi, a major coal province. The total installed capacity of Meng Xi power grid has reached 4.3 million kilowatts, and the power supply is sufficient.
Among them, Baiyun Obo iron mine has large reserves and low mining cost, and rare earth is a very important strategic resource.
As the main consumer of group mines, the company provides an important material foundation for the company's development. At present, in order to cooperate with the expansion plan, the group company is increasing its investment in mines, and recently signed a framework agreement with Mongolia to jointly develop mines.
The proximity of the company to raw materials and energy supply places helps the company to control the transportation cost of raw materials and ensure the stable supply of raw materials.
The unique resource advantage of the company will be transformed into the competitive advantage of the company through the management of the company.
2 Variety advantage
In recent years, the company actively adopted the way of eliminating backward equipment and multi-channel financing, and successively invested in the construction or transformation of some technologically advanced projects such as "thin slab continuous casting and rolling", "seamless pipe transformation", "rail beam transformation" and "cold rolled sheet", which laid the foundation for the company to adjust its process structure and upgrade its products to produce high value-added products. At present, the company has outstanding competitiveness in hot-rolled and cold-rolled plates of heavy rails and large-section seamless steel pipes, and the share of main products in the domestic market remains relatively stable. In terms of railway steel, the company's competitors in seamless steel pipe products are Baosteel, Angang and Pangang, with a market share of 25% in the domestic market. In terms of channel steel products, the company's competitors are WISCO, Angang and Pangang, with a domestic market share of 24%, and the domestic market share of hot-rolled and cold-rolled plates is relatively stable.
At present, the company's main product markets are railways, petroleum, automobiles, household appliances and other industries, with stable growth and optimistic demand.
3 Policy advantages
In order to maintain the sustained and rapid economic growth in China, the eastern and western economies develop in a balanced way, and the industrial structure is upgraded and adjusted as a whole. Government departments have made important decisions to increase infrastructure construction, expand domestic demand, and promote national economic development and the strategy of developing the western region. Therefore, it is expected that the climax of infrastructure construction will continue to implement more favorable preferential policies for the western region of China during the Eleventh Five-Year Plan period or even longer. In this extremely favorable macroeconomic environment, the company, as a steel production enterprise located in the central and western regions, will seize this historical opportunity to expand the market share of products and improve the profitability of enterprises.
At present, the company continues to enjoy the preferential income tax policy of 10%.
4 technical advantages
At present, only seven domestic enterprises can adopt CSP process, and the CSP project of Baotou Steel is not only in the leading position in China, but also has created two world firsts with unprecedented production speed. The number of continuous casting furnaces of the second company also ranks first in the world. At the same time, Baotou Steel grasped the key link of production organization and successfully changed the slab thickness of continuous caster from 67mm to 72mm, which not only improved the operation level of the whole production line, but also rapidly improved the output and operation rate of continuous caster in hot rolled thin slab company. The production capacity has reached the level of 2.8 million tons/year, and the company has become the training base of Simak, a famous Asian steel equipment manufacturer.
5 overall listing potential
While consolidating existing products, the company actively extends the company's industrial chain. The upstream steel assets owned by group companies will be the acquisition targets of listed companies. Once the company is listed as a whole, it will help the company reduce related transactions, extend the enterprise value chain and improve the company's profitability.
At present, the company has a comprehensive production capacity of 3 million tons of steel and 5 million tons of steel. In 2005, the group company will realize 7 million tons of steel, and the group company is planning to move forward to realize100000 tons of steel.
The development of iron and steel industry and iron ore in the group company will provide favorable development conditions for the development of Baotou Steel.
Development prospect of the company
Cold rolling project is a profit growth point
At the beginning of the company's listing, the main products were seamless steel tubes with special-shaped steel wires, and the product structure was successfully transformed from the construction company of thin slab continuous rolling project and cold rolling project. In 2005, the income of plate accounted for 53%, seamless steel pipe accounted for 24% and heavy rail accounted for 65,438+02%.
Through asset replacement with the Group, the company put low value-added wire and strip into high value-added seamless steel pipe project.
Introduction of cold rolling project:
The cold-rolled sheet project belongs to the domestic-funded project in the catalogue of industrial products and technologies encouraged by the state at present. As an important working procedure supporting project for deep processing of hot rolled plate, this project has been included in the key project of structural adjustment for the western development of Inner Mongolia Autonomous Region, and it is also a key project for the implementation of 100 key industrial projects in Inner Mongolia Autonomous Region. The construction of this project is of great significance to promote the adjustment of industrial structure in Inner Mongolia, promote regional economic development, improve the economic benefits of Baotou Steel and enhance market competitiveness.
The total investment of the cold-rolled plate project is 2.67 billion yuan (including foreign exchange161270,000 USD), of which the investment in fixed assets is 2.56 billion yuan (including construction period interest177.82 million yuan) and the working capital/kloc-0.05 million yuan.
After the completion of the project, a production line with an annual output of 6,543,800 tons of high-quality cold-rolled galvanized coated coils will be formed, including 597,800 tons of commercial cold-rolled coils, 344,200 tons of commercial cold-quenched coils, 3,065,438 tons of commercial galvanized coils and 6,543,800 tons of commercial coated coils.
At present, the project has been put into production. In 2006, the cold rolled sheet project will become a new profit growth point for the company. It is estimated that the cold rolled sheet project will increase production by 1 10,000 tons in 2006.
The production of cold-rolled plates can not only replace imports, but also increase the added value of the company's products. In 2005, China imported 25 million tons of steel, of which plate imports accounted for nearly 90%. Cold-rolled plates imported 7010.3 million tons, and composite plates imported 5.57 million tons, accounting for 50% of the total domestic consumption in the same period.
The company's cold-rolled plates are mainly used in downstream industries such as home appliances, construction and light industry. Because of the deep processing of the hot-rolled sheet produced by ourselves, it can not only increase the added value of the product, but also enhance the competitiveness of the enterprise, making the company a product structure that forms a plate pipeline.
In addition, the company's heavy rail and seamless steel pipe market prospects are also very optimistic.
According to the plan of the Ministry of Railways, the total investment in railway construction during the Eleventh Five-Year Plan period is 654.38+250 billion yuan, and the newly-built line is10.98 million kilometers, of which the planned investment in railway construction in 2006 is10.5 times of the sum of the Eighth Five-Year Plan, the Ninth Five-Year Plan and the Tenth Five-Year Plan.
A large amount of investment in railway construction directly drives the consumption of heavy rail in Baotou Steel. At present, with the increase of steel cost, the railway price in China is also rising.
Under the background of falling steel prices, the company's annual output of 1 10,000 tons of heavy rails and large profiles will become an important source for the company to increase its profitability.
With the cold rolling project put into production, the proportion of high value-added products will exceed 80%, and it will become an important production base of thin and heavy rail seamless steel pipe in China.
Financial analysis and profit forecast
Since the company went public, its profitability has been continuously improved, its asset scale has been continuously expanded, and its product structure has been continuously optimized.
We predict that the steel output of Baotou Steel will exceed 5 million tons in 2006. With the completion of the1400,000-ton cold rolling project and the transformation of100,000-ton heavy rail production line and pipe rolling production line, the steel production capacity and added value of the company will be further improved.
With the transfer of manufacturing industry to China and the upgrading of domestic consumption structure, it not only promotes the adjustment and upgrading of industrial structure in China, but also promotes the upgrading of steel consumption structure, which will expand the future development space of steel industry.
In the future, with the expansion of Baotou Steel, the product structure will be continuously optimized and the added value of products will be further improved. The unique product structure of Baotou Steel can resist the risk of industry cycle decline, and the current industry adjustment provides a rare opportunity for the development of Baotou Steel.
Company valuation and market opportunities
Due to the drop in steel prices, the steel industry may experience negative growth in 2006, but the market has over-reflected that the current valuation level of listed steel companies is based on the losses of the whole steel industry in 2006, and the actual trend will be the opposite, but a considerable number of steel companies will not lose money. This expectation should be revised in the future.
The price negotiation of imported iron ore in April 2006 will be an important factor affecting the steel price and the profit of the steel industry. The rise and fall of imported iron ore prices will directly affect the profitability of domestic steel enterprises, because half of China's iron ore demand needs to be imported to meet the needs of the whole industry. At the beginning of 2005, it was concluded that the price of iron ore rose by 7 1.5%, which was later proved to be wrong. Today, we also believe that the steel industry will not lose money in 2006.
Mittal, the world's largest steel company, acquired Arcelor, the world's second largest steel company, detonating the international steel stock Arcelor to rise by 30%, and the share prices of major steel companies in the world returned to high levels.
The strength of international steel stocks will force domestic steel stocks to strengthen.
The rise in the futures price of non-ferrous metals drives the rise of non-ferrous metals, and the China concept may be more related to the new consumption capacity of developing countries. The substitution efficiency and price comparison effect of metal products will make investors rethink the concept of cycle and resources, and the intrinsic value of steel products will gradually be fully recognized by domestic investors.
We compare Baotou Steel with international and domestic steel companies and find that the current P/E ratio and P/B ratio of Baotou Steel are lower than the international level. If we consider the reform of non-tradable shares and the growth of the company, the value of the company is obviously underestimated.