The only leading power coal company with considerable overseas resources is headquartered in Shandong Province, while actively laying out three major coal bases in Shandong, Shaanxi, Inner Mongolia and Australia. It is the only coal enterprise in China with considerable overseas resources. The controlling shareholder of the company is Shandong Energy Group Co., Ltd., and the parent company is stronger after the strategic reorganization in November 2020. By the end of 2020, the company's annual coal production capacity has exceeded 200 million tons, of which the total approved domestic coal production capacity is close to 9000 million tons / year, and the total overseas coal production capacity has exceeded 120 million tons / year, and the company's raw coal output has exceeded 100 million tons in the past two years. Since the beginning of this year, the company's profitability has improved significantly due to the upward overlay of coal prices and focusing on the main industry. As of the first three quarters of 2021, the company's ROE was 18.8%, up 9.5% from a year earlier, and the company's ROE has risen to the top of a major comparable company.

Competitive advantage: the competitive advantage of overseas business with elastic potential + coal chemical business prospect + high dividend company is mainly reflected in three aspects. First of all, power generation and heating enterprises with coal medium-and long-term contracts may become the general trend of the industry, then the thermal coal plate may gradually move towards public utilities, cycle attributes will gradually weaken, although the performance of listed companies in the plate is expected to stabilize at a high level but inelastic. We believe that the world is in the stage of energy transformation with frequent superimposed natural disasters, and coal, as one of the representatives of traditional energy, may have a periodic shortage of supply and demand more frequently than before, so the trend of overseas coal prices may have a certain elastic potential. Therefore, compared with other comparable companies, the company's unique overseas coal resources are expected to continue to provide flexible support for the company's performance. Secondly, the company acquired the coal chemical assets of the parent company at the end of 2020, and the production and sales volume of the coal chemical business increased significantly. In the first three quarters of this year, the gross profit of the company's coal chemical business increased by more than 700% compared with the same period last year, and the proportion of gross profit rose sharply from about 4% during the 13th five-year Plan period to more than 20%. Considering that the company still has at least 2 million tons of capacity under construction, the coal chemical business is expected to become the company's second growth curve. Third, the company's dividend rate in recent years is in the forefront of comparable companies, with a guaranteed dividend rate of 50% in the next four years. The dividend rate of the company has significantly exceeded 50% in the past two years, so the high dividend can further strengthen the investment value of the company.

Industry review and outlook: domestic and overseas coal prices were once unprecedentedly strong, and the future trend or stock differentiation before the first ten days of November this year, the trend of overseas coal prices may be mainly led by domestic coal prices. However, from mid-November, unlike the trend of domestic coal prices, overseas coal prices are volatile, which may be related to the greater impact of La Nina climate on the supply and demand of overseas coal resources. Looking to the future, we believe that the elasticity of domestic coal prices may further shrink under the condition that supply and demand will widen and superimpose the new deal of the long Association. While overseas coal prices may be affected by the global energy transformation superimposed by frequent extreme weather, the price trend is expected to continue to have a certain degree of flexibility.

Investment suggestions take into account many factors, such as the benchmark price of the domestic Coal Association is expected to rise, the trend of overseas coal prices is elastic, and the gross profit center of the company's coal chemical business is expected to rise substantially, compared with other comparable companies in the country. the company's future performance center has both stability and flexibility, while the company's high dividend ratio in the forefront of the industry can further strengthen its own investment value. We estimate that the EPS of the company from 2021 to 2023 is 3.32,2.66 and 2.72 yuan respectively, and the corresponding PE is 6.86,8.56 and 8.35 times respectively.

Risk Tips:

1. Risk of non-seasonal decline in domestic and overseas coal prices

two。 Under the situation of economic pressure, the downstream demand is uncertain.