The hottest machinery industry, steel price rise,

2022-08-22
  • Detail

Machinery industry: steel prices squeeze the machinery industry

Guide: the macro data in January showed that the machinery industry did not weaken. According to the data of 2008, the growth rate of investment in the machinery industry has declined, while the growth rate of transportation equipment manufacturing industry remains high; The growth rate of industrial added value of the machinery industry also slowed down slightly; The profit growth rate of the machinery industry is relatively fast; And mechanical and electrical products

The macro data in the month of

showed that the machinery industry did not weaken. According to the data of 2008, the growth rate of investment in the machinery industry has declined, while the growth rate of transportation equipment manufacturing industry remains high; The growth rate of industrial added value of the machinery industry also slowed down slightly; The profit growth rate of the machinery industry is relatively fast; The export growth rate of mechanical and electrical products decreased slightly, while the import growth rate increased slightly. In general, taking into account the Spring Festival, southern snow disaster and other factors, these data are within a reasonable range

the price rise of steel and other production factors squeezed the profit space of the industry. Since 2007, the purchase prices of raw materials, fuels and power have continued to rise, exceeding the ex factory price index of industrial products, especially steel, which will seriously affect the profit space of industrial products. The rise of CPI, which reflects the price of means of living, will also bring some pressure to the improvement of wage level

the appreciation of RMB has little short-term impact, but has a large long-term impact. Many companies have adopted measures such as adjusting the debt structure (borrowing a large amount of US dollar foreign debt, etc.) and long-term foreign exchange settlement to lock in the exchange rate of recent foreign exchange income. However, in the long run, the continued appreciation of the RMB will still have a greater impact on enterprises with more exports

although greatly affected by the rise in steel prices, the growth of the industry is still relatively certain: machine tools, shipbuilding, construction machinery and other industries are still in the boom cycle, with a rapid growth rate

introduction: Market Review

as we pointed out in the 2008 annual strategy report "rapid development under multiple pressures", in 2008, the machinery industry and the entire Chinese economy were faced with multiple pressures, such as subordinated debt, macro-control, rising production factors and so on. Only enterprises with core technology and high value-added products can effectively avoid these pressures

in the first quarter, these adverse factors further appeared or amplified. The U.S. subprime debt crisis has further intensified, and the U.S. economy is in recession. The South suffered the worst snow disaster in 50 years, CPI remained high, and the economic situation was not optimistic. The continued appreciation of the RMB has brought greater pressure on the export of the industry. The continuous rise of production factors such as steel and energy has brought a great test to the industry. In the first quarter, the price of iron ore rose by 65%, which was much higher than expected. Steel enterprises have increased the ex factory price of steel, which has a great impact on the machinery industry of large steel users. We lowered the growth rate expectation of the machinery industry in 2008

I. macroeconomic data in 2008

the growth rate of fixed asset investment in the machinery industry decreased slightly

the machinery industry is highly positively correlated with fixed asset investment, and is a typical investment driven cyclical industry. Since 2004, the fixed asset investment of the three major machinery sub industries: general equipment, special equipment and transportation equipment manufacturing has maintained a high growth rate, which is higher than the growth rate of the national fixed asset investment. The higher growth rate of fixed asset investment has driven the rapid development of the whole machinery industry. At the beginning of 2008, the growth rate of investment in the machinery industry decreased, especially the growth rate of investment in special equipment manufacturing industry slowed down significantly, while the growth rate of transportation equipment manufacturing industry remained high

compared with the situation at the beginning of 2007, and considering the impact of the snow disaster in southern China in June, the slowdown trend of fixed asset investment growth is not obvious in general

the industrial added value of the machinery industry remained high

according to the data of the National Bureau of statistics, the growth rate of industrial added value of the machinery industry slowed down slightly in 2008. Compared with the situation at the beginning of 2007, the slowdown is not obvious. Considering that some areas in the South were affected by severe snow disasters in January, production and sales were affected to a certain extent, and the slowdown in growth rate should be temporary. We expect that the growth rate of industrial added value of the machinery industry will remain high in 2008, and the industry will still be able to maintain a high prosperity

the profit of machinery manufacturing industry increased rapidly

according to the data of the National Bureau of statistics, industrial enterprises above Designated Size achieved a profit of 348.2 billion yuan in 2008, with a year-on-year increase of 16.5%. In 2007, the profit growth rate of industrial enterprises in China was 43.78%, and the profit growth rate of industrial enterprises slowed down significantly. Under the background of CPI constantly hitting new highs, the profits of the power industry under strict control fell sharply and the oil processing industry fell into losses. If these industries are excluded, the profit growth rate of other industries in the month will reach 40.10%. After considering the serious impact of the snow disaster in 2008 and the large negative impact of the continuous appreciation of the exchange rate on export related industries, the profit growth rate of related enterprises in 2008 is still a high growth rate

the profit of mechanical equipment manufacturing is still at a good level on the whole, which shows that the demand is relatively strong, pushing up the profit growth of the midstream industry. Under the background of the obvious rise in labor costs and the high price of raw materials, the profitability of China's industrial enterprises can still maintain a high level, which shows that the labor productivity of China's industrial enterprises, especially machinery and equipment, is still improving relatively fast compared with the medium and high-end manufacturing industry, and actually offsets the impact of rising costs

the export growth rate decreased significantly, which is worth paying attention to

Import and export data. According to customs statistics, China's export growth rate decreased significantly in February, and the trade surplus narrowed significantly. In February, China's exports increased by 6.5% year-on-year, a sharp decrease of 20.2 percentage points from January; Imports increased by 35.1%, 7.5 percentage points higher than that in January; The trade surplus reached US $8.555 billion, down 64% from the same period last year. The import growth rate was strong, and the increase in import volume was mostly raw materials and energy products

we believe that the main reasons for the sharp decrease in export growth in February are the Spring Festival and the snow disaster in southern China. In March 2007, there was also a sharp decline in export growth. In addition, the growth rate of exports to the United States fell from 5.29% to -5.25%

at present, the impact of the U.S. economic downturn on China's exports is only limited to the United States itself, but after a period of time, the impact of the U.S. economy on other economic growth will eventually appear, which may further affect China's exports. The import and export data in the coming months deserve attention

the export growth rate of mechanical and electrical products decreased slightly in August, while the import growth rate increased slightly. Considering the Spring Festival, southern snow disaster and other factors, this growth rate is within a reasonable range, and the prosperity of the machinery industry shows no signs of weakening

II. The rising price of production factors such as steel will squeeze the profit space of the industry.

the continuous rising price of production factors such as raw materials will bring greater pressure to the machinery industry

according to the statistics of the National Bureau of statistics, in February, the ex factory price of industrial products increased by 6.6% year-on-year, while the purchase price of raw materials, fuels and power increased by 9.7%. Among them, the ex factory price of crude oil increased by 37.5% year-on-year, the ex factory price of coal mining and washing industry increased by 18.5% year-on-year, and the ex factory price of ferrous metal smelting and rolling processing industry increased by 17.9% year-on-year

the purchase prices of raw materials, fuels and power have continued to rise, and the increase has exceeded the ex factory price index of industrial products. Since October 2007, the difference between the two has been further amplified, which is bound to squeeze the profit space of industrial products. The rise of CPI, which reflects the price of means of living, will also bring some upward pressure to the wage level

affected by factors such as the 65% rise in the international benchmark price of iron ore in the new year and the year-on-year rise in shipping costs, domestic steel prices rose explosively in 2008. Major manufacturers have raised the ex factory price of steel, ranging from yuan/ton. On February 25, Baosteel introduced the price policy of plain carbon steel in the second quarter. The hot rolling and cold rolling of main products were increased by 800 yuan/ton, with the increase rates of 21% and 17% respectively. On March 19, Baosteel once again adjusted the emerging ex factory price of new fire-retardant materials for steel. The price of ordinary hot-rolled products was increased by 300 yuan, and the price of ordinary cold-rolled products was increased by 400 yuan

most of the raw materials of mechanical products are steel. Steel and spare parts made of steel generally account for about half of the cost of mechanical products. The sharp rise in steel prices will inevitably bring greater cost pressure and negative impact to the machinery industry

there is a certain correlation between the steel price and the gross profit margin of mechanical products

from the historical data (regardless of macro-control, technological upgrading and other factors), the gross profit margin of listed mechanical companies has a certain correlation with the steel price: the change of the company's gross profit margin level should slightly lag behind the change of steel price. Steel prices reached a relative peak during the year, and the gross profit margin of machinery listed companies in 2005 also fell to the lowest point in recent years. The rise in steel prices will reduce the gross profit margin of the machinery industry in 2008

and relatively speaking, ordinary machinery companies are less affected by the price rise of steel, while special equipment companies are more affected by the price rise of steel

choice of advantageous companies

under the condition that the product price and the three expenses of the enterprise remain unchanged, the impact on the company's gross profit margin and net profit is statically estimated (non recurring profit and loss are not considered). We can get:

cost change = original cost × Proportion of steel in cost × Original cost of steel increase = product price × (1-Original gross profit rate)

net profit change (percentage) = cost change × (1-income tax rate)/original net profit = (1-Original gross profit rate) × (1-income tax rate) × Proportion of steel in cost × From this, we can see that enterprises with higher gross profit margin, net profit margin and income tax rate will be less affected, and the smaller the proportion of steel cost, the smaller the impact. In this regard, we should focus on enterprises with high gross margin and high value-added products, and avoid enterprises producing low gross margin products. High gross profit margin and high added value often represent higher pricing power. Enterprises can also offset the increase in costs by raising product prices

the profit margin of an enterprise's main business reflects the added value of its core products. We choose companies with high profit margin of main business as our focus. Comparing the profit margins of the main businesses of various sub industries of the machinery industry in the third quarter (the overall method), we found that the product profit margins and added value of the sub industries such as shipbuilding, mechanical basic parts, metallurgical and mining equipment, engineering machinery, machine tools and so on were high, and these industries were also the sub industries with rapid growth in 2007. Like the view in the 2008 annual strategy report, we still focus on shipbuilding, engineering machinery, machine tools and other industries, and pay attention to companies with high gross profit margins in these industries

the impact of steel price rise on different sub industries - product price rise is an inevitable choice

mechanical basic parts: Based on the steel price rise of 20%, the gross profit margin of the product is 20%, and the steel cost accounts for 50%, the steel price rise will reduce the gross profit margin of the product by 8 percentage points, and the product needs a price rise of 8% to fully cover the cost rise of steel

the price rise of steel has the most direct and relatively largest impact on the mechanical basic parts with steel as raw materials

we expect that the price increase of mechanical basic parts will inevitably offset some of the cost growth, especially some of the high-tech parts, which have a certain monopoly

Copyright © 2011 JIN SHI