Main points of investment:
Lower the profit forecast and target price, and maintain the overweight rating. The company issued a performance forecast for 2021, realizing a net profit of 1.22 billion to 1.28 billion (+ 11.4 ~ 17.1%) and deducting non-net profit of 1.22 billion to 1.28 billion (+ 12.1% ~ 17.8%). Due to the large impairment and cost increase, Q4 lost money in a single quarter and its performance was lower than expected. It lowered the company's 2021-2023 EPS to 0.50,1.00,1.09 (formerly 1.27,1.85,1.86) yuan, gave the company 2022 8xPE according to the industry average, lowered the target price to 8.0 yuan (formerly 10.16) yuan, and increased its holding rating.
Affected by multiple factors such as impairment, Q4 lost money in a single quarter. The company's Q4 return net profit center is-590 million, which is 1.06 billion lower than that of Q3. The main reason for the transition from profit to loss is: 1) the holding subsidiary Feihong Chemical (equity 75.03%) intends to make an impairment of about 850 million yuan, which is expected to affect the return net profit of about 640 million in 2021; 2) under the influence of iron and steel production restrictions, the coke demand and the average price of coke are lower than that of Q3, while the average price of raw material coking coal remains high in the same period, and the coke profit of the main industry decreases. 3) the cost of China Coal Huajin or Q4 has increased, and the company's investment income mainly comes from China Coal Huajin (equity 49%). So far, the investment income of China Coal Huajin is lower than that of Q1~Q3 in the same year, so we judge that China Coal Huajin Q4 or cost increase.
Wangjialing Mine increases production and ensures supply, and the investment return of China Coal Huajin is expected. Wangjialing Mine is the main mine in Huajin, the mine is expected to increase production in 2022: 1) affected by the safety accident, the mine 21Q3 production has been affected, production has resumed in October 21, with more attention to safety issues, production is expected to expire in 2022; 2) according to documents in Shanxi Province, the production capacity of Wangjialing Coal Mine will be increased by 1.5 million tons to 7.5 million tons.
The price of coal has bottomed out and rebounded, so the impairment is light. At the beginning of 2022, due to the import restrictions of Indonesia and the replenishment of power plants in the north of the Winter Olympic Games, coal prices have risen. Although supply and demand are still loose, the dark time of the coal market has passed.
After the company plans to increase a large amount of impairment in 21 years, it is expected that the subsequent impairment pressure will decline, and the performance will be released without worry.
Risk tips. The macro economy fell short of expectations; coal prices fell more than expected.
