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【出版时间及名称】：2010年3月中国钢铁行业研究报告
【作者】：德意志银行
【文件格式】：pdf
【页数】：40
【目录或简介】：
Chinese Steel
Much higher iron ore prices?
Steel prices matter more
Julian Zhu
Research Analyst
(+852) 2203 6207
julian.zhu@db.com
Steven Tao, CFA
Research Associate
(+852) 2203 6160
steven.tao@db.com
Steel prices more than offset iron ore costs
The market seems to have been so focused on the significant iron ore prices hike
that it has overlooked the steel prices trend, which has a far more exaggerated
impact on earnings. With HRC and CRC prices respectively up 25-30% and 30-
47% YoY in 1Q10 and likely heading higher in 2Q, we expect Angang/Magang to
pass on the rising costs. We retain Buy on Angang and Magang and expect strong
performances as steel prices continue to rise. We reiterate our positive view on
steel upstream (Buy on China VTM) and upgrade China Moly to Buy from Hold.
Deutsche Bank AG/Hong Kong
All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local
exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche
Bank does and seeks to do business with companies covered in its research reports. Thus, 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. Independent, third-party research (IR) on certain companies covered by DBSI's research
is available to customers of DBSI in the United States at no cost. Customers can access IR at
http://gm.db.com/IndependentResearch or by calling 1-877-208-6300. DISCLOSURES AND ANALYST CERTIFICATIONS ARE
LOCATED IN APPENDIX 1. MICA(P) 106/05/2009
Industry Update
Top picks
Angang Steel (0347.HK),HKD14.34 Buy
China Molybdenum (3993.HK),HKD6.16 Buy
Global Markets Research Company
Steel prices rising, but still have more to go
Despite the volatility of spot/futures steel prices, the monthly steel prices
announced by major steel mills (the real earnings driver) have been steadily rising
since November 2009. In 1Q10, Baosteel’s HRC/CRC ASPs were up 16%/29%
from FY09 and up 25%/47% YoY; Angang’s HRC/CRC ASPs were up 8%/30%
from FY09 and up 1%/44% YoY and Magang’s HRC/CRC ASPs were up 9%/21%
from FY09 and up 6%/30% YoY, respectively. With demand typically strong in 2Q
as buying for new projects begins, we expect steel prices to continue to trend
upwards. On rising costs and strong demand, we have revised our steel price
assumptions, expecting them to rise 20% and 5% in 2010 and 2011 from the
previous 5% and 5%, respectively.
Upstream a better play; upgrading China Moly to Buy from Hold
Steel demand has had a powerful inflationary impact on a number of important
feedstocks, such as iron ore and coking coal, and we see moly benefiting as well.
We expect the moly market to move convincingly into deficit in 2010 and remain
there in 2011. That said, we have raised our moly price forecasts for 2010 to
USD18/lb from USD16/lb and from 2011 to USD25/lb from USD15/lb, leading us to
upgrade China Moly to Buy from Hold. We also maintain Buy on China VTM.
Earnings estimates adjusted
We have adjusted our earnings forecasts for Angang and Magang to reflect the
potential of a 50% iron ore prices hike (vs. Deutsche Bank’s current 35% forecast)
as well as a 55% coking coal price settlement (though Chinese steel producers do
not follow international settlements and domestic settlements usually come in
much lower) and stronger steel prices. Despite the hefty increase in raw materials
costs, these are largely offset by the relatively smaller adjustments to steel prices.
Remain Overweight; top picks are China Moly/Angang
We use a residual income model, TP = BV*(ROE-g)/(COE-g), to derive target prices
for Angang and Magang. We use FY10E book value and cycle-average ROE to
capture through-the-cycle earnings growth dynamics. We use a DCF model to
derive target prices for China VTM and China Moly. The key earnings drivers for
Chinese steel and upstream steel producers are the sales prices of their
respective products and their production costs. Any substantial changes to ASPs
or production costs would significantly alter our earnings estimates and valuations.
Table of Contents
Steel prices drive earnings ............................................................... 3
2010 steel prices far above 2009 levels....................................................................................3
YTD steel price hikes already offset 50%/55% iron ore/coking coal prices rise .......................4
Steel prices outweigh raw materials costs – for major players.................................................5
Historical evidence suggests steel producers are able to pass on rising costs ........................8
Higher steel prices in 2Q................................................................... 9
Rising costs + demand recovery = higher ASPs.......................................................................9
We also expect further upside to spot/futures steel prices ......................................................9
Policy headwinds almost behind us........................................................................................12
Upstream still a better play ............................................................ 13
Moly is also an upstream steel company................................................................................13
Moly market likely to be in deficit in 2010-11..........................................................................14
China Molybdenum ......................................................................... 16
China VTM Mining........................................................................... 24
Angang Steel.................................................................................... 28
Maanshan Iron and Steel ................................................................ 32
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