This article is the "Benxi Steel Plate: Operating Net Cash Flow Continues to Improve, R&D Investment Continues to Launch, and the Group's Asset Integration is Expected" of the "Company Depth" series produced by the Securities Times and China Capital Market Research Institute.
Summary of the report
Continue to increase R&D investment, strengthen new product research and development, and fill the gap of the company's related products. The company has continued to increase R&D investment in recent years, and its R&D expenses in 2022 will reach 58 million yuan, an increase of 8.08 times compared with 2018. The company's R&D expenses in the first three quarters of 2023 were 52 million yuan, an increase of 44.66% over the same period last year. This year, the company has developed new products such as ultra-high-strength steel 980Mpa grade cold-formed hot-dip galvanized quenching steel, hot-dip galvanized formable duplex steel DH780, and high-strength beam steel BGJTM800L, which have filled the company's gap in related fields.
Continue to deepen cost reduction. In recent years, the company has focused on reducing process costs, benchmarking with advanced enterprises and industry levels, learning Xi from their successful experience, and taking various measures to reduce costs. The company's financial expenses, sales expenses, and administrative expenses in 2022 decreased by 62%, 88.68%, and 27.64% respectively compared with 2018.
There is an expectation of asset consolidation. The company intends to carry out asset replacement with Benxi Iron and Steel to replace all assets and liabilities related to the steel business with its mining assets. Benxi Steel's main business includes iron ore mining, iron ore concentrate processing, and has a large number of iron ore resources. The transaction is conducive to improving the company's asset quality and profitability.
Net operating cash flow continued to improve. The company's net operating cash flow in the first three quarters was 4.853 billion yuan, a year-on-year increase of 197.24% and an increase of 2.8 times compared with 2022.
Trillions of national bonds are good for the development of the industry. The central government will issue an additional 1 trillion yuan of treasury bonds in the fourth quarter of this year, and arrange all of them to local governments through transfer payments. This measure has improved the market's expectations for the economic environment, and the steel sector, as a cyclical industry, tends to perform better when the economic boom is up.
Actively promote green and low-carbon development. In recent years, the company has been committed to building "AAA" level scenic garden-style factories and environment-friendly enterprises, promoted the construction of a number of environmental protection projects, and explored the path of "double carbon" with practical actions.
Benxi Iron & Steel Group's issuance of the first science and technology innovation note in Liaoning Province is expected to help further enhance the company's comprehensive competitiveness. Benxi Iron & Steel Group successfully issued the first medium-term note in Liaoning Province in the interbank bond market in September this year, which will provide more adequate financial support for the company's future development and help further enhance the company's comprehensive competitiveness.
1. Company profile
Benxi Iron & Steel Co., Ltd. (hereinafter referred to as "Benxi Iron & Steel Co., Ltd." or "the Company") was established on June 27, 1997 by restructuring the assets and liabilities of the steel mill, the primary rolling mill and the hot continuous rolling mill owned by Benxi Iron and Steel Co., Ltd., and was listed on the main board of the Shenzhen Stock Exchange on January 15, 1998.
The company is mainly engaged in steel smelting, rolling processing, power generation, coal chemical industry, special steel profiles, railways, import and export trade, scientific research, product sales and other businesses, the introduction of the world's advanced equipment technology to implement equipment upgrading and transformation of the main steel industry, the basic construction of high-quality steel base, the formation of more than 60 varieties, more than 7,500 specifications of the product series, high value-added and high-tech products accounted for more than 80%, are widely used in automobiles, home appliances, petrochemical, aerospace, machinery manufacturing, energy transportation, In the fields of building decoration and metal products, and exported to many countries and regions.
The company's main products are hot-rolled sheets, cold-rolled sheets, galvanized sheets, special steels and other series. Among them, hot-rolled and cold-rolled sheets are the most important products of the company.
In 2022, the output of pig iron will be 10.003 million tons, an increase of 165,300 tons year-on-year, the output of crude steel will be 10.552 million tons, an increase of 114,000 tons year-on-year, the output of hot-rolled plate will be 13.2874 million tons, an increase of 70,500 tons year-on-year, the output of cold-rolled plate will be 5.948 million tons, and the output of special steel will be 443,400 tons. The company mentioned in its 2022 annual report that the target crude steel output in 2023 is 11.41 million tons, a year-on-year increase of 8.13%.
Shareholding structure and actual controller: As of September 30, 2023, the total shareholding ratio of the company's top ten shareholders reached 79.51%, and the direct controlling shareholder is Benxi Iron and Steel (Group) Co., Ltd., holding 58.65% of the company's shares. In 2021, Anshan Iron and Steel completed the restructuring, and Anshan Iron and Steel became the indirect controlling shareholder of Benxi Iron and Steel Plate.
The social security fund is the first of the top ten shareholders of the company. According to the company's third quarter report, the national social security fund has appeared among the top ten shareholders of the company for the first time in recent years, with a total of 11.3138 million shares, accounting for 0.28% of the total share capital.
Second, the core highlights
Aspect 1: The company's operating net cash flow continued to improve.
Benxi Steel Plate released the third quarter report of 2023 on October 31, with revenue of 43.503 billion yuan in the first three quarters, a year-on-year decrease of 9.07%, a net profit loss attributable to the parent company of 1.246 billion yuan, and total assets at the end of the period of 46.643 billion yuan, a year-on-year increase of 2.91%. Among them, the company's revenue in the third quarter of 2023 was 12.935 billion yuan, a year-on-year increase of 0.87%, and the net profit loss attributable to the parent company was 241 million yuan, which was narrower than the loss in the same period last year. The company's net operating cash flow continued to improve, with net operating cash flow of 4.853 billion yuan in the first three quarters, a year-on-year increase of 197.24% and an increase of 2.8 times compared with 2022.
Aspect 2: Continue to deepen cost reduction.
In recent years, the company has continued to accurately benchmark advanced enterprises and the advanced level of the industry around reducing process costs, learned Xi good practices and experience, and done everything possible to reduce costs. The company's financial expenses, sales expenses and administrative expenses in 2022 will be 595 million yuan, 128 million yuan and 663 million yuan respectively, a decrease of 62%, 88.68% and 27.64% respectively from 2018. In addition, in the first three quarters of 2023, financial expenses and administrative expenses also decreased by a certain percentage compared to the same period last year, by 46.38% and 9.14%, respectively. These figures show that the company has achieved significant results in terms of cost control.
Aspect 3: Increase R&D investment and strengthen new product R&D.
The company has continued to increase R&D investment in recent years, and its R&D expenses in 2022 will reach 58 million yuan, an increase of 8.08 times compared with 2018. The company's R&D expenses in the first three quarters of 2023 were 52 million yuan, an increase of 44.66% over the same period last year. From the perspective of R&D intensity, the company's R&D expenditure accounted for more than 3% of operating income in the past three years, which was higher than the average ratio of R&D expenditure to operating income of listed companies in the steel plate category.
In July this year, Benxi Steel's third-generation ultra-high-strength steel product, ultra-high-strength steel 980Mpa grade cold-formed hot-dip galvanized quenching and distribution steel, was successfully rolled off the production line at the No. 3 Cold Branch of the Plate Cold Rolling General Plant, filling the research gap in the field of Benxi Steel's third-generation galvanized high-strength steel. In September, the company completed the independent research and development of hot-dip galvanized reinforced formability duplex steel DH780, injecting new impetus into the high-end market of automotive steel for the company. In October, the company successfully rolled high-strength beam steel BGJTM800L, which is the highest strength grade of non-quenched and tempered hot-rolled beam steel, with a thickness of 2.0mm to 10.0mm, which has obvious advantages in realizing the lightweight and safety of special vehicles, and can be widely used in vans, semi-trailer girders and other structural parts. In addition, in recent years, the company has also achieved the world premiere of 2000 MPa hot stamping steel, and has gradually built a "series of hot stamping products" represented by this.
Aspect 4: There is an expectation of asset integration.
The company announced on March 21 that the company intends to replace all assets and liabilities related to the steel business with the assets of Benxi Iron and Steel Mining.
On June 21, Benxi Iron and Steel Plate released a major asset replacement and related party transaction plan, the company intends to carry out asset replacement with Benxi Iron and Steel, intends to place 100% equity of Benxi Iron and Steel Mining, and intends to place all the assets and liabilities of the listed company in addition to retaining assets and liabilities, and the difference between the proposed assets and the proposed assets will be made up by one party to the other party in cash.
According to public information, Benxi Iron and Steel Mining Co., Ltd. is mainly engaged in iron ore mining and iron ore concentrate processing, supplemented by pellet production, metallurgical ash production and explosives production. Its main products are iron ore concentrate, pellets and metallurgical ash products. Benxi Iron & Steel Mining is rich in iron ore resources, with 1.271 billion tons of recorded iron ore resources, including 1.037 billion tons of Nanfen open-pit iron mine, the largest single open-pit iron mine in Asia. At the same time, the iron ore concentrate produced by Benxi Iron and Steel Mining has the advantages of high grade and low cost. The iron ore mined by Benxi Iron and Steel Mining is mainly magnetite, and its mine has natural endowments such as thick ore body and good occurrence conditions, and iron ore has the characteristics of low phosphorus, low sulfur and good selectivity.
Through this transaction, the company will place the original steel business assets as a whole, and at the same time inject mining-related business assets with strong profitability and development potential into the listed company to realize the transformation of the main business, which will help improve the company's operating conditions and improve the company's asset quality and profitability.
Anshan Iron and Steel Group, the indirect controlling shareholder of the company, believes that the injection and replacement of steel assets with high-quality mining assets can completely solve the problem of competition in the steel business involved in Benxi Iron and Steel Plate and Anshan Iron and Steel Co., Ltd.
It is worth noting that Anshan Iron and Steel Group also owns Anshan Iron and Steel Mining, a subsidiary of the main mining industry. According to public information, Anshan Iron and Steel Mining has 9 iron ore mines, 8 concentrators, 1 sintering plant, 2 pellet plants and 2 auxiliary material mines, and is a leading iron mining enterprise with the largest control of iron ore resources, the largest output scale, the lowest production cost and comprehensive leading technology and management in China.
Benxi Iron and Steel Mining has landed on A-shares through major asset restructuring, and whether Anshan Iron and Steel Mining, a subsidiary of Anshan Iron and Steel Group, will be further integrated into the listing platform is worthy of market attention.
Aspect 5: Trillions of national bonds are good for the steel industry.
The central government will issue an additional 1 trillion yuan of treasury bonds in the fourth quarter of this year, and arrange all of them to local governments through transfer payments. Among them, it is planned to use 500 billion yuan this year and carry forward 500 billion yuan to next year. The funds will be used in eight major areas: post-disaster recovery and reconstruction, key flood control projects, natural disaster emergency capacity improvement projects, other key flood control projects, irrigation area construction and renovation and key soil erosion control projects, urban drainage and flood prevention capacity improvement actions, key natural disaster comprehensive prevention and control system construction projects, and high-standard farmland construction in Northeast China and Beijing-Tianjin-Hebei disaster-stricken areas.
The issuance of special treasury bonds has improved the market's expectations for the economic environment, and the market is expected to improve. As a cyclical industry, the steel sector tends to perform well when the economic boom is up.
Assuming that all the funds from the special treasury bonds are used for water conservancy construction, the steel consumption of the water conservancy industry will increase rapidly. There are three main types of steel used in water conservancy construction: first, steel for infrastructure construction: construction steel such as rebar, wire rod, and round steel is mainly used in the construction of dam areas and other projects. The second is steel for metal structures: mainly used for metal gates in dam areas, and pipe inner walls, etc., which require Q345 and other low-alloy medium and heavy plate products. The third is the steel for pressure pipelines: most of them are wide and thick plates, which are mainly used for the manufacture of diversion pressure pipelines in the factory dam, as well as auxiliary facilities such as ribs. According to estimates, in the comprehensive water conservancy project, the investment in steel bars accounts for 3% to 5% of the total investment in the project, and the equipment investment includes sluices, pumps, hoists, power generation equipment, etc., accounting for 10% to 12% of the total investment.
According to the calculation of 3% steel investment, the next two years will drive 30 billion yuan of steel bar demand scale, and then consider the amount of steel such as wire rod, plate, pipe, etc., will undoubtedly create a huge steel consumer market. In addition, the demand for indirect steel in water conservancy construction should not be underestimated. In the process of water conservancy construction, a large number of construction machinery needs to be used, including cranes, excavators, loaders, etc., which will promote the development of the machinery and equipment industry and enhance the demand for steel in the machinery industry. The construction of water conservancy projects is closely related to hydropower projects, and the hydropower industry also needs to consume various types of steel such as rebar, profiles, metal structural steel, and pressure pipeline steel.
Calculated at 4,000 yuan / ton of steel, 30 billion yuan can digest 7.5 million tons of steel bars, calculated in two years, an average of 3.75 million tons of construction steel demand per year, an average of 72,100 tons per week, taking into account the seasonality of the actual construction, the weekly consumption increase of more than 250,000 tons in the construction season may be next year. This is only building materials, taking into account the demand for other steel in the middle of water conservancy construction, it is expected that the total consumption of steel will increase by more than 10 million tons in 2024.
Aspect 6: The company actively promotes green and low-carbon development, and the construction of environmental protection projects is progressing in an orderly manner.
In recent years, the company has vigorously implemented the green and low-carbon development strategy, strived to build an "AAA" scenic garden-style factory and an environment-friendly enterprise, and explored the path of "double carbon" with practical actions.
During the "Eleventh Five-Year Plan" to the "Thirteenth Five-Year Plan" period, Benxi Iron and Steel made every effort to promote the large-scale, modernization and efficiency of technical equipment, optimize the product structure and process structure, quickly eliminate backward production capacity, and vigorously launch environmental protection projects. At the same time, Benxi Iron and Steel will improve the urban ambient air quality of the "blue sky project" as an important measure of green ecological development, into the environmental protection work.
In 2021, Benxi Iron and Steel Co., Ltd. implemented a new round of large-scale technological transformation and ultra-low emission transformation represented by key projects such as special steel electric furnace upgrading, special steel rolling mill transformation, CCPP power generation project, 220KVA substation project, 1700mm production line improvement, and coke oven flue gas desulfurization and denitrification.
In 2022, the company built 13 ultra-low emission projects, involving the transformation of ironmaking and iron tapping yards, the upgrading of dust removal in ore tanks, the transformation of desulfurization and denitrification of sintering heads, the transformation of secondary dust removal in steelmaking, and the transformation of VOCs treatment in coking process, dust removal on the machine side, desulfurization and denitrification. Pollution prevention and control facilities are operating stably, and the total pollutant emissions in 2022 will decrease by 8.6% year-on-year.
In 2023, the company will issue a fixed asset investment plan of 1.52 billion yuan, focusing on the implementation of projects such as environmental protection and intelligent upgrading of the material yard, the upgrade of the 1780 production line, the transformation of the main body of cold rolling in the general cold rolling plant and the transformation of ultra-low emissions. Adhere to the high starting point planning, high standard construction, strict control of the technical level, energy consumption, environmental protection, key technology and equipment level to reach the advanced level of the industry. At present, a number of key projects such as the No. 5 RH refining transformation of the steelmaking plant and the new tertiary dust removal system of the steelmaking plant have been put into operation, and the environmental protection transformation of the stockyard of the ironmaking plant and the centralized control of energy control center entered the commissioning stage in September this year.
Aspect 7: Benxi Iron and Steel Group issued the first science and technology innovation note in Liaoning Province, which is expected to help the company's comprehensive competitiveness be further enhanced.
On September 27, 2023, Benxi Iron & Steel Group successfully issued the first medium-term note in Liaoning Province in the interbank bond market, with an issuance scale of 1.5 billion yuan and a coupon rate of 3.5%. Science and technology innovation notes refer to debt financing tools issued or raised by scientific and technological innovation enterprises for the field of scientific and technological innovation, which can enhance the financing services of the bond market for the whole life cycle of scientific and technological innovation enterprises, and accurately empower the needs of "hard technology" and high-tech project development with investment and financing at both ends, which can effectively broaden the financing channels of enterprises in scientific and technological innovation.
Benxi Iron & Steel Group issued medium-term notes in the open market for the first time, demonstrating the company's scientific and technological innovation strength and good corporate image, which will provide more adequate financial support for the company's future development and help the company's comprehensive competitiveness to further improve.
Risk Warning
1. Macroeconomic risks. The downstream demand of the domestic steel industry is generally weak, and the market pattern of supply exceeding demand has not changed fundamentally. The optimization and adjustment of the domestic steel layout is accelerating, the strategic restructuring of iron and steel enterprises continues to advance, and the changes in macro policies such as fiscal and financial policies for stable growth in China will bring many uncertainties to the development of the steel industry.
2. Raw fuel price and supply risk. The monopoly situation of global iron ore supply is difficult to change in the short term, the domestic iron ore demand is highly dependent on foreign countries, the shortcomings of strategic resources such as coal and coke are obvious, the implementation time of the "cornerstone plan" of the mainland iron and steel industry is short, and the independent and controllable ability of the steel industry chain and supply chain is weak. The financial attributes of ore, coal and coke black resources have been enhanced, and domestic and foreign investment speculation is frequent. The energy conservation and emission reduction policies continue to deepen, the production capacity of upstream coal and coke enterprises is limited, and various internal and external factors lead to frequent fluctuations in raw fuel prices, and the risks of raw fuel prices and safety and supply guarantee increase.
3. Environmental protection risks. With the continuous strengthening of the country's environmental protection efforts and the promotion of "carbon peak and carbon neutrality", the environmental protection department continues to increase the supervision of pollution control in the iron and steel industry, and the environmental protection investment and operating costs of iron and steel enterprises are rising, and iron and steel enterprises will face increasing pressure on environmental protection.
4. Risk of suspension of major asset restructuring projects. The company's material asset restructuring transaction plan and related compliance need to be further demonstrated, communicated and negotiated, and the possibility of adjustment, suspension or cancellation of the transaction plan cannot be ruled out.
Copyright Notice
This report is independently prepared based on information that the China Capital Market Research Institute, a subsidiary of Securities Times, believes to be reliable and publicly available, but does not guarantee the accuracy and completeness of such information. The copyright of this report is only owned by Shenzhen Securities Times Co., Ltd. (hereinafter referred to as "the Company"). Without the written permission of the company, no company, institution or individual shall infringe the company's copyright in any form such as reprinting, copying, publishing, quoting or redistributing to others.
If the quotation and publication are made with the consent of the Company, it shall be used within the permitted scope, and the source shall be indicated as "Securities Times, China Capital Market Research Institute", and this report shall not be quoted, abridged or modified in any way contrary to the original intention. The Company reserves the right to pursue such liabilities. All trademarks, service marks and marks used in this report are trademarks, service marks and marks of the Company.
Report typesetting and editing: Wu Zixuan
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