Anshan Steel Co. Ltd.

Public (SZ: 000898)

Company Facts

Anshan Steel Co. Ltd. is mainly involved in the smelting of the black metal and steel press forging. The company was known as Anshan Steel Group Corporation, which was the Chinese first steel & iron manufacturing enterprise that was set up in December 1948 (People’s Republic of China was established in year 1949). Approved by National System Reform Committee, the company was established on May 1997 and got listed in Shenzhen Stock Exchange in the same year.

Thanks for the steel price appreciation and product structure’s perfection, in the first half of year 2008, the company has achieved business income and net profit margin of RMB 40.17 billion Yuan and RMB 5.98 billion Yuan separately, which made 22.7% and 23.6% increase corresponding the same period of previous year. 

The company targets high-end special steel manufacture such as container board, pipe board, ship board, vehicle board, home applicant board, petrol pipe board and weathering steel, about 92% of its products are special steels which has are able secure the profit margins on a relatively high level. The company has become the largest supplier for ship board and pipe steel segments in China.  Moreover, the company’s research & development has leading advantages internationally. Thus, the products of the company have been widely used in more than 20 large-scaled important national pipe engineering projects.  

Recently, the company has been exclusively selected as the supplier of 600,000 tons of bullet train’s steel-track for Zhengxi Railway construction project, which is the monument in Chinese railway history as the speed of the bullet train is going to be 350 km/hr. The project has brought stable business for the company at the moment for sure, more importantly, it allows the company to step its footprints into 100-meter high-speed steel track production and tightly grasp the opportunity of the national-wide bullet train network construction and enjoy the expectant long term benefits.

Financial Review:

Related Companies:

-- Collaboration:

Ansc-Tks Galvanizing Co. Ltd.

Ansc – Dachuan Heavy Industry Dalian Steel Processing & Distribution Co. Ltd.

Changchun FAM-Anjing Steel Processing & Distribution Co. Ltd.

Ansc-Tks Steel Distribution (Changchun) Co. Ltd.

Ansc Shenyang Steel Processing & Distribution Co. Ltd.

Tks-Ansc (Changchun) Laser tailor welded blanks Co. Ltd.

Ansc Industry Group Packing Steel Strip Co. Ltd.

-- Holding Company

Anshan Steel & Iron Group Corporation. Percentage of rights and interests: 67.28%

-- Subsidiaries:

Ansc Steel Distribution (Wuhan) Co. Ltd.

-- Invested by same holding company:

Anshan Steel & Iron Group Corporation International Economical & Trading Co. Ltd.

Anshan Steel & Iron Group Corporation Institute of Designing

Anshan Steel & Iron Group Corporation Machinery Loading Co. Ltd.

Anshan Steel & Iron Group Corporation Real Estate Development Group Co. Ltd.

Anshan Steel & Iron Electronics Liability Company

Anshan Steel & Iron Group Corporation Fire-resistant Material Company

Anshan Steel & Iron Vehicle Transportation Limited Liability Company

Anshan Steel & Iron Group Corporation Railway Transportation Equipment Manufacture Company

Anshan Steel & Iron Group Corporation Hospitality Service Company

Anshan Steel & Iron Group Corporation Automation Company

Dalian Huayelian Automation Company

Anshan Steel & Iron Group Corporation Financial Co. Ltd.

Anshan Steel & Iron Group Corporation Steel Rope Limited Liability Company

Anshan Steel & Iron Group Corporation Real Estate Company

Anshan Steel & Iron Group Corporation Mining Company

Anshan Steel & Iron Group Corporation Railway Construction Company

Anshan Steel & Iron Industry Group Co. Ltd.

Anshan Steel & Iron Construction Group Co. Ltd.

Anshan Steel & Iron Heavy Machinery Limited Liability Company

Stock Health:

As on 13 August, 2008

Open: 9.90     High: 10.35   Low: 9.50   Close: 10.23   Vol.: 11,298,650                

Key Stats & Ratios

     Unite: RMB 10,000 Yuan

Daily Stats (last one month):

Performance Analysis

The location of the company has played an significant role in the performance of the company. As the company is located in Anshan, Liaoning Province. The very nature of the geographic location has decided that only road transportation is available for transporting its imported raw materials from the close-by harbors and delivering steel products to its customers in country-wide and world-wide, which has become the bottleneck for the fast growth of the company. Therefore, the company has invested heavily in the Bayuquan Project, which is the largest in scale steel manufacture site in China that is connected with Bayuquan Harbor (Yingkou City, Liaoning Province), railways and national express ways.

The project is expected to be finished and start its operation within August 2008. Thereafter, the productivity of the company will increase by 31% and reach 21 million tons per year as well as able to transport its products to more than 100 ports and over 40 countries as well as to countrywide locations via railway or road transportation. Investors are suggested to pay attention to the progress of the project, as it is assumed that the project will start bringing profits in year 2009.

In my opinion, the recent slump of the stock price reflects the market worries towards sluggish demand in down-stream industries such as the realty and automotive industries. It is to some extent will affect the performance of steel & iron industry; however, the net profit margin of the company will not be affected as much as the market’s assumed while the price increase of the raw material costs are relatively less than the steel products’ price growth.

Importantly, the parent company of Anshan Steel Co. Ltd., Anshan Steel & Iron Group Corporation has reformed with another Chinese steel & iron giant – Benxi Steel & Iron Group Corporation. The strategic movement has not only effectively reduced price competition between two giants, but will reduce the costs in raw material consumption.  As 80% of the steel mines are supplied by the parent company, Anshan Steel Co. Ltd. will gain more competitive advantages through the low costs of supplies.

Personally, I would like to suggest this stock to investors, especially, I am positive about middle term investment returns. For long term investment, there are some factors of concern, such as increase in fuel price that has put immense pressure on the company’s manufacturing costs, as well as the government’s policies that tightening up the exporting of steel & iron. To conclude, I believe that investors are likely to gain fruitful if they pay attention to the above mentioned factors and adjust their investment decisions accordingly.