High price elasticity drags down the coal sector, and the chemical sector stabilizes
The benchmark coal price assumption was raised, and the net profit forecast for Yanzhou Coal Industry for 21/22/23 was adjusted to 19.5 billion/18.5 billion/19.9 billion yuan (previous value: 13.7 billion/14.4 billion dollar/14.4 billion yuan). The average spot price of thermal coal is expected to fall to 850 yuan/ton year on year in 2022 (2021E: 1,000 yuan/ton), and the average price of gas and coal may drop to 1,000 yuan/ton (2021E: 1,200 yuan/ton). According to our profit forecast, Yankai's net profit fell 4.9% year on year in '22, due to 1) the gross profit of the coal sector falling 10.8% year on year, and the increase in production at the Shandong and Inner Mongolia bases will not be enough to make up for the profit drag brought about by falling prices; 2) the gross profit of the chemical sector increased, and the expansion of production and sales will be able to offset the impact of narrowing profit margins. Based on a 50% payout ratio, a dividend of $2.0/1.9 per share is expected for 21/22, corresponding to a dividend yield of 17%/16% (2021/11/19 closing). Maintaining the “buy” rating, EPS lowered the target price to HK$16.2 based on a 3.5 times 22-year forecast. The 21-23E EPS is 4.01/3.81/4.10 yuan.
Spot sales accounted for a high proportion, and the price drop was greater than that of similar companies
According to our judgment on the year-on-year decline in market prices, it is estimated that Yancoal's gross profit in the coal sector may drop 10.8% year over year to 35.4 billion yuan in 2022. 1) The average price of coal produced by Yancoal is expected to drop 93 yuan/ton to 607 yuan/ton over the same period last year. The sharp year-on-year price drop was mainly due to a combination of lower market prices for thermal coal and coking coal and a higher proportion of spot sales of Yancoal (about 80%). 2) In terms of unit cost, a decrease in the average selling price will reduce resource tax expenses, while an increase in self-produced coal production will facilitate the dilution of unit production costs. We expect the unit cost of self-produced coal to fall by 19 yuan to 286 yuan/ton over the same period last year. 3) The increase in production was mainly due to the recovery of the Shandong headquarters and the Inner Mongolia base. We expect domestic coal sales to increase 9.5 million tons year-on-year to 109 million tons in '22.
The coal chemical business is stable, and the profit margin for production/sales expansion or the narrowing is expected to increase slightly by 2.2% to 6.21 billion yuan in 2022. On the one hand, the gross margin of the sector is expected to narrow by 1 percentage point to 29.7% year on year, mainly because the decline in the average price of chemical products is greater than the cost reduction; on the other hand, production growth will support the sector's overall profit level. 1) Yulin's methanol production may increase to 8 million tons (2021E: 6.5 million tons), 2) Yulin's annual production of 600,000 tons of methanol is expected to be launched at the end of September this year, 2022 It will contribute to production throughout the year.
Risk warning: 1) New project development is delayed; 2) demand falls short of expectations.