This report is read as follows:
The volume and price of coking coal have risen, and profits have increased substantially, which is in line with expectations. The interim dividend is 15 Hong Kong cents, with a dividend rate of 47%; demand resumes, supply falls, and coking coal prices have rebounded; there are abundant cash reserves, and high dividends and high dividends highlight the value of investment.
Summary:
Maintain the profit forecast and target price, maintain the "overweight" rating. The company's 2022H1 realized revenue of HK $4.66 billion (+ 91%) and net profit of HK $1.61 billion (+ 139%), benefiting from 21H1's low base price of coking coal and a year-on-year increase in performance, in line with expectations. The interim dividend is HK15 cents, with a dividend rate of 47.2% compared with 22H1's home net profit. Maintain HK $0.69, HK $0.68, HK $0.67 EPS in 2022-2024, maintain HK $4.02 target price and overweight rating.
The quantity and price of coking coal have risen, and profits have increased substantially. The original coking coal output of 2022H1 Company is 2.7 million tons (+ 3%), the superimposed washing rate of raw coal production is increased, the output of coking clean coal is 1.74 million tons (+ 20%), and the sales volume is also 1.74 million tons. The growth rate is less than the output, mainly due to 21H1 external coking clean coal 130000 tons. In the same period, the flexible price adjustment method of the company enjoys the high prosperity of coking coal, and the price of coking coal is 2521 yuan / ton up 1106 yuan / ton compared with the same period last year. Although affected by resource tax (ad valorem tax, year-on-year + 60 yuan / ton), wages (year-on-year + 15 yuan / ton), mine recovery management fund raised (year-on-year + 6 yuan / ton) and so on, the original coking coal cost rose from 325 yuan to 418 yuan / ton, but the increase was far less than the selling price. 2022H1 coking coal business achieved 3.88 billion (+ 114%), realized gross profit of 2.61 billion (+ 214%), and the profit of the main coking coal industry increased significantly.
Demand resumes, supply falls, and coking coal prices have rebounded. 1) supply: domestic output of coking clean coal has declined in July, ensuring the supply of some coking coal mines may reduce the washing rate, and coal mine security checks are expected to be stricter in October, and coking coal supply will fall at a high level; 2) imports: Mongolia imports will benefit from railway opening, but railway supporting facilities are still under construction, it is difficult to increase significantly in the short term. Russian coal has shifted to the east, but it is difficult to increase significantly in the short term due to transport capacity constraints. 3) demand: hot metal output has achieved a V-shaped reversal, demand has increased, for coking coal enterprises in the upper reaches of the black industry chain, the demand pressure test has been completed; 4) Price: the tax price of Jingtang main coking coal (produced in Shanxi) has also risen from 2350 yuan in July to 2550 yuan / ton in mid-September, with the improvement of fundamentals, coking coal prices are expected to remain high.
Abundant cash reserves, high dividends and high dividends highlight the value of the investment. By the end of June 2022, the company's cash and equivalents were HK $5.87 billion, another record high. With abundant cash reserves, the company continued to pay high dividends to shareholders. In 2021, the company paid a dividend of 40 Hong Kong cents per share, with a dividend rate of 80%. If the dividend rate of 80% in 21 years is maintained, the dividend yield corresponding to 22-year results will be as high as 21% (closing price as of September 16).
Risk hint. Coking coal prices fell more than expected; coal production fell short of expectations.