Huatai Securities: It is recommended to mainly allocate steel bonds to centrally-owned enterprises with obvious scale and fund advantages, and to moderately explore opportunities for perpetual bonds within three years.

Huatai Securities pointed out that since 2021, steel companies have adjusted their product structure and increased exports, but prices are under pressure. With the implementation of policies to combat internal competition this year, the industry's supply and demand contradictions have been marginally eased, and corporate profits have bottomed out and rebounded. However, there are differences between this round of policies to combat internal competition and the supply-side reforms in 2015. At that time, there was a lot of excess capacity that could be quickly cleared, coupled with the monetization of the shantytown renovation program driving up real estate demand, leading to a significant improvement in corporate profits. This time the supply side relies more on self-regulation mechanisms, and demand side differentiation continues. In the future, companies still need to reduce quantity and improve quality. Industry may continue to improve in terms of supply and demand driven by policies against internal competition next year, but the extent may be limited. In addition, the overall low industry bond spreads and the continued differentiation of corporate fundamentals exist. It is recommended to allocate steel bond investments mainly to large state-owned enterprises with clear scale and funding advantages, and to moderately explore opportunities for perpetual bonds within 3 years. As profits continue to improve, focus on medium-sized steel companies with short-to-medium term prospects.