Hebei Xuanong (000923) Review of Major Issues: Change of Machinery Business Name Change Welcomes New Development
Event: The company issued an announcement that it intends to sell the assets and debts related to the construction machinery business, with an asset evaluation of 9.
62 trillion, debt assessment is 9.
61 trillion, the net transaction amount is 119.
In addition, the company intends to change the Chinese name from “Hebei Xuanhua Construction Machinery Co., Ltd.” to “Hegang Steel Resources Co., Ltd.” (referred to as “Hegang Steel Resources Co., Ltd.”).
Comment: The construction machinery sector continues to improve the company’s performance after the release.
The company’s construction machinery business segment is mainly in the parent company, and the iron ore business is in the South African company. Through the subsidiary’s quadruple Hong Kong split consolidated statement, the parent company’s statement can directly observe the historical performance of the construction machinery segment.
The net profit of the H1 parent company in 2017, 2018 and 2019 was -0 respectively.
9.8 billion, 1.
05 ppm and -0.
55 trillion, of which in 2018 there were quadruple Hong Kong dividends1.
9.5 billion, destroy this one.
Net profit after 9.5 billion is -0.
900 million, that is, the replacement of the construction machinery sector in 2017, 2018 and 2019 is 0.
98 billion, 0.
900 million and 0.
5.5 billion, basically stable at about 100 million. After the placement of this sector, the company is expected to increase its annual net profit by about 100 million.
Iron ore: The highest production cost and strong profitability.
The company’s iron ore raw materials are associated low-quality magnetite that has been stored for decades, with high production stability and extremely low cost, which is basically stable at about $ 9.
In addition, the company’s railway freight is $ 17-18, and the sea freight is currently $ 15-16, when it is high, it is $ 18. The total landed cost is about $ 50. Until the iron ore price center moves downward in the later 北京桑拿洗浴保健 period, there is still strong profitability.
Copper sector: The output gradually recovered with some improvement and reduction.
The company’s copper mine is located in a closed pit above the first phase and the second phase of construction has not yet reached the production stage. In the third quarter, the second phase of the copper supporting project has been supplemented and used. The production and sales of the product have gradually recovered.
The second phase of the company’s copper production is expected to be completed in 2022. It is expected that the copper sector will gradually reverse its losses and contribute to the performance increase.
It is proposed to change its name to Hesteel Resources, bringing imagination.
The company intends to change the Chinese name from “Hebei Xuanhua Engineering Machinery Co., Ltd.” to “Hegang Iron & Steel Resources Co., Ltd.” (referred to as “Hegang Iron & Steel Resources Co., Ltd.”), focusing on creating a listed platform for the mineral resources sectorAs the sole resource sector company of the Hesteel Group, the company relies on its shareholders to carry out mineral resources business and has broad development space.
Earnings forecast and investment recommendations: Starting from the third quarter, due to the dual factors of production recovery and decline in overseas demand, the price of iron ore has improved. Therefore, we have revised down our earnings forecast. We forecast operating income for 2019-2021 to be 54.
11 trillion (previous forecast was 64.
32 / -10,000 yuan), the net profit attributable to the mother is estimated to be 5.
1.4 billion (previous forecast was 8.
09 / -10,000 yuan), the corresponding EPS is 0.
73/0.94 yuan (previous forecast was 1.
24 / -yuan), the corresponding PE is 18/20/16 times, combined with the valuation of similar companies, 20 times the PE of resource stocks, the target price is reduced to 17 yuan, maintaining a “strong push” rating.
Risk warning: Demand stalls and production continues to rise