发帖
雷达卡
China steel sector
000898.SZ, 000898 CH
Upgrade to: Overweight
Previous: Neutral
Rmb18.90
Price Target: Rmb21.00
From overcapacity to tight capacity 600808.SS, 600808 CH
Overweight
Rmb7.00
Price Target: Rmb8.30
China
Steel
Frank LiAC
(852) 2800-8511
frank.m.li@jpmorgan.com
Wenwen Wang
(852) 2800-8501
wenwen.x.wang@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
See page 32 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may
have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision.
• View: In our report, China Steel Sector: Better outlook ahead, published
on June 9, 2009, we switched to the positive camp on the China’s steel
sector. Our key arguments: (1) many of the steel’s downstream sectors
have witnessed an earlier- and stronger-than-expected recovery, due to
(a) China’s proactive monetary policy, which has proven effective in
bringing about increased industrial output growth, and (b) China’s
aggressive fiscal spending program, which has provided a major boost to
China’s steel demand; and (2) the growth in China’s real estate sector’s
floor space under construction appears to have bottomed out.
• Facts: Since early June FY09, the recovery in China’s steel sector has
turned out to be much stronger than we expected due to a real demand
recovery from downstream users, such as property, infrastructure and
autos, as reflected in the following: (1) A sharper-than-expected recovery
in steel prices—Shanghai HRC and Shanghai rebar prices have risen
30% and 34% from their lows on Apr 17, 2009 to Rmb4,200 per ton and
Rmb4,170 per ton on July 31, 2009, respectively. (2) In response to the
strong demand from downstream industries, China’s crude steel
production resumed growth in May 2009, with China’s crude steel
production rising 13.8% from the previous low of 43.4 million tons in
April 2009 to 49.4 million tons in June 2009.
• Actions: We raise our estimates, PTs, and upgrade Angang - A to
OW: Given a stronger-than-expected demand recovery from many
downstream industries, such as autos, infrastructure, and real estate, we
increase our China crude steel demand forecast by 11.3% for FY09; and
by 10% for FY10. We raise our FY10 earnings forecasts for Maanshan
and Angang by 32% and 113%, respectively, to factor in our higher sales
volume and sales price forecasts. We maintain our OW rating on
Maanshan - A, and upgrade Angang - A from Neutral to OW. We raise
our Jun-10 PT for Angang - A from Rmb12.1 to Rmb21.0, based on 2.6x
FY10E P/BV, which represents a 60% premium to its historical average
prospective P/BV of 1.62x, translating into 25x FY10E P/E; and for
Maanshan - A from Rmb5.4 to Rmb8.3, based on 2.2x FY10E P/BV,
which represents a 40% premium to its historical average prospective
P/BV of 1.6x, translating into 24x FY10E P/E.
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