Net profit in 2022 was HK$2.72 billion, and the dividend ratio remained 80% high. In 2022, the net profit of Shougang Resources to its mother reached a record high, up 7% year-on-year to HK$2.72 billion. In terms of production and operation, the company continued its coking coal sales strategy, and sales of self-produced fine coking coal increased 4% year-on-year throughout the year.
Core production costs remained stable, but unit production costs rose 6.6% due to uncontrollable cost increases such as resource taxes. The company's overall gross profit increased 20.4% year over year, and gross margin increased 2.3 percentage points to 64.6%. The total annual dividend of the company per share was HK$0.43, accounting for 80% of the net profit of the parent. Based on the revised coal price forecast, the company's net profit for 23/24 was reduced by 6.4%/4.4%, and the target price was lowered to 3.3 Hong Kong dollars (0.95x 23E BVPS 3.51 Hong Kong dollars, the previous value was 3.6 Hong Kong dollars). Considering the company's stable operation and high percentage of dividends, 23-25E EPS was 0.47/0.47/0.48 HKD.
Sales have been steadily increasing, and prices have increased significantly
In 2022, the company's three active mines produced a total of 5.25 million tons of raw coking coal, an increase of 2% over the previous year; they produced 3.23 million tons of refined coking coal, an increase of 1% over the previous year. Refined coal sales increased +1% year over year. Among them, sales of home-produced refined coal increased 4% year over year, and outsourced refined coal sales fell sharply to 5,000 tons from 130,000 tons in 2021.
In terms of price, the average price of the company's fine coking coal increased 383 yuan/ton (19%) year-on-year to 2,402 yuan/ton in 2022. Benefiting from a sharp increase in prices, the company's annual revenue increased 16% year over year.
Core costs are stable and gross profit is improved
In 2022, the company's raw coal production cost increased 25 yuan (6.6%) year on year to 404 yuan/ton, mainly affected by the increase in resource tax and other taxes levied on sales prices and value-added tax. This portion increased the cost by 18 yuan/ton year on year. Excluding the impact of uncontrollable costs such as resource tax and one-time amortization, the company's original coking coal production cost remained stable, with only a slight increase of 3% affected by labor costs. The company's overall sales cost increased 9.1% year over year to 2,925 billion yuan, but price and sales volume increases offset the impact of cost increases. Gross profit increased 20% year over year to 5.29 billion yuan, and gross margin increased 2.3 percentage points to 64.4% year over year.
High percentage dividends continue
The company declared a 2022 year-end dividend of HK$0.28 per share, an interim dividend of HK$0.15 per share, and a total dividend of HK$0.43 per share for the full year of 2022, accounting for 80% of the net profit of the mother, and maintained a high percentage of dividends of around 80% for six consecutive years. Given that the company's assets are streamlined and efficient, and the operation is stable, and there is plenty of cash on hand, there will still be strong financial support for future dividend expenses.
Risk warning: coal price performance fell short of expectations; project progress was slower than expected.