Valin Steel(SZ:000932) Huafu Securities·2024-03-28 16:00Investment Rating - The report gives a "Buy" rating for the company, with a target price of 6.82 CNY based on a 7.5 times PE ratio for 2024 [5][7][12]. Core Views - The company is focusing on optimizing its product structure and enhancing lean management, which has significantly improved its risk resistance capabilities [2][3]. - The steel industry is expected to see a recovery in profits due to improved supply-demand dynamics and a shift towards high-end, high-value-added steel products [4][11]. Summary by Sections Company Overview - Hualing Steel is a leading steel enterprise in the central and southern regions of China, established in 1999 and listed on the Shenzhen Stock Exchange [19][21]. - The company has a clear shareholding structure, with Hunan Steel Group as the major shareholder [21][23]. Industry Analysis - The steel industry is undergoing supply-side reforms, which are expected to yield significant results, with policies aimed at controlling production in 2024 [4][45]. - Demand is anticipated to stabilize due to economic recovery, particularly in infrastructure, automotive, and real estate sectors [4][11]. Company Performance - The company has been optimizing its product structure, focusing on high-end steel products, with R&D investment reaching 6.453 billion CNY in 2022, accounting for 3.84% of total revenue [2][3]. - Cost control measures have led to a significant reduction in expense ratios, with the asset-liability ratio decreasing to 51.79% by Q3 2023 [3][5]. Profit Forecast and Investment Recommendations - The company is expected to maintain stable profitability even during industry downturns, with projected net profits of 5.906 billion CNY, 6.280 billion CNY, and 7.679 billion CNY for 2023, 2024, and 2025 respectively [5][12]. - The report suggests that the company’s valuation is likely to recover, given its historical performance and the expected improvement in the steel market [5][12].