Risk Reward Update

研报英文原文证据摘录

Risk Reward Update

UpdateM

RiskRisk RewardReward– Anhui -HongluAnhuiSteelHongluConstructionSteel(002541.SZ)Construction (002541.SZ)

Slow margin recovery, subdued by muted industrial demand

PRICE TARGET Rmb12.80 UNDERWEIGHT THESIS

Base case, derived from discounted cash flow (DCF) methodology. We apply a cost of equity ▪Honglu is the largest steel structure

of 12.2%, as calculated from a beta of 1.3, a risk-free rate of 2.7%, and an equity risk premium producer in China, with ~3% market share

of 7.3%. We assume the company's revenue grows at 3% annually beyond our explicit by volume.

forecast period. ▪Steel structures are gaining popularity in

construction. Advantages over traditional Rmb21.46

steel-reinforced concrete include high

Consensus Price Target Distribution Rmb12.80 Rmb26.03 strength, strong seismic capacity, and MS PT

shorter construction periods.Source: Refinitiv, Morgan Stanley Research Mean Morgan Stanley Estimates

▪However, we think slow recovery from

new infrastructure and industrial projects

investment may weigh on steel structure

RISK REWARD CHART demand and margins.

CNY Consensus Rating Distribution

Rmb23.80Rmb23.80(+43.72%)Rmb23.80(+43.72%)(+43.72%) 80% Overweight

24 0% Equal-weight

20% Underweight

MS Rating

Rmb16.56Rmb16.56Rmb16.56 Source: Refinitiv, Morgan Stanley Research

Rmb12.80Rmb12.80(-22.71%)Rmb12.80(-22.71%)(-22.71%)

Risk Reward Themes

Pricing Power: Negative

6 Rmb8.20Rmb8.20(-50.48%)Rmb8.20(-50.48%)(-50.48%) View descriptions of Risk Rewards Themes here

JUN '25 DEC '25 JUN '26 JUN '27

Key: Historical Stock Performance Current Stock Price Price Target

Source: Refinitiv, Morgan Stanley Research

BULL CASE Rmb23.80 BASE CASE Rmb12.80 BEAR CASE Rmb8.20

17.1x 2026E P/E 11.2x 2026E P/E 9.1x 2026E P/E