The company's performance increased significantly in the first half of the year, and Q2 grew at a quarter-on-quarter growth rate of more than 1.5 times, mainly due to a significant increase in investment income from participation in coking coal mines. Considering that the current coke profit can be maintained, the price of coking coal is expected to be strong, the company's investment income may continue to increase, and the valuation advantage is obvious, we upgrade the company's rating to "buy".
The net profit in the first half of the year was significantly better than that of 206.16% of the same period last year. The company's operating income / net profit in the first half of 2021 was 50.290.1375 billion yuan respectively (year-on-year changes were + 61.38% / + 206.16%). The performance growth was mainly due to the rise in coke and chemical products prices and a substantial increase in investment income. EPS is 0.54 yuan, year-on-year change + 206.22%. The net profit after deducting non-profit was 1.369 billion yuan, a year-on-year change of + 208.13%. Among them, Q2 achieved a net profit of 924 million yuan in a single quarter (+ 104.62% compared with the same period last year, + 168.56% compared with the same period last year). On the one hand, it is the contribution of product prices, on the other hand, the investment income of holding coking coal mines contributed most of the profit growth. At the same time, due to the small profit base of the main business and the offset of deferred income tax assets, the company income tax expense is negative, which effectively reduces the tax burden.
The output of Q2 coke increases, the gross profit margin decreases obviously, and the investment income of coking coal mine increases greatly. The company's coke production / sales volume in the first half of 2021 was 179.16 million tons (year-on-year change + 13.73% plus 14.51%), and coke revenue increased by 1.767 billion yuan, or + 82.45%. The production / sales volume of Q2 coke is 93.55 × 108t (month-on-month change + 9.27% pound-21.32%), and the average price of coke is 2040.23 yuan / ton (month-on-month change-2.48%). However, in the context of a short-term reduction in coke supply, coke prices are expected to remain high in the second half of the year, and coke profits may be limited by costs. The company took a stake in 49% of Huajin, a high-quality coking coal mine. In the first half of the year, the net profit of China Coal Huajin was 2.753 billion yuan, contributing 1.088 billion yuan to the company's investment income, while the investment income of Q1 company was only 331 million yuan, and Q2 increased by 1.29x compared with the previous month. Under the background of the current month-on-month rise in coking coal prices, it is expected that the investment income of Q3 company will further increase.
The price of chemical products has increased significantly, effectively thickening the performance of the main industry. In the first half of 2021, the company's chemical product income was 1.103 billion yuan (year-on-year change + 14.72%). Except for carbon black, the price of methanol, pure benzene and asphalt increased by 13.51%, 52.04% and 33.66%, respectively, compared with the same period last year. Q2 methanol production / sales volume was 7.08 / 71900 tons (month-on-month change + 14.95% plus 18.17%). The price and sales volume of chemical products are on the rise. The company's chemical sector revenue and profits are expected to continue to increase in the second half of the year.
Risk factors: macroeconomic fluctuations, affecting coke and coking coal price expectations.
Investment suggestion: based on the latest coking coal and coke price expectations, we raise the company's EPS forecast for 2021 to 1.20 for 2023 (the original forecast is 0.87 for 0.83), and the current price is 5.64 yuan, corresponding to 4.7 for 2021 for 23, 6.1 for 5.6x. According to the average valuation level of the plate, the company is given a target price of 9 yuan, corresponding to P/E10x in 2022. Considering that the current coking coal price is relatively strong, pushing up the company's investment income, we upgrade the company to the "buy" rating.