Company performance: the company's operating income / net profit in the first half of 2009 was 1.636 billion yuan /-158 million yuan, a decrease of 54.28% and 192.94% compared with the same period last year; basic earnings per share was 0.19 yuan, a decrease of 0.39 yuan over the same period last year, which was lower than we expected. During the reporting period, the volume and prices of coke and pig iron of the company's main products fell, and the proportion of coke revenue of the main products in the main business income dropped to 15.41% from 43.68% at the end of last year; in the same period, the proportion of income in the international market dropped from 15.38% to 0.
Coke business: volume and price are difficult to recover obviously. At present, the company has an annual coke production capacity of 1.75 million tons, and the coke oven of Hongan Phase II is expected to be completed by the end of the year. It is estimated that the coke production capacity will reach about 2.4 million tons in 10 years. Due to production restrictions in the first half of the year, the company's capacity utilization rate is only about 60%, and the average annual yield is expected to be 60%, and the corresponding output is about 1.05 million tons. After four months of recovery, coke prices are currently facing downward pressure as steel prices fall. We expect the company's average coke price in the second half of the year to be the same as that in the first half of the year.
It will take time for the company to integrate resources and improve its performance: at the end of 2006, the company joined the Sino-Thai coal industry and developed high-quality coking coal resources with recoverable reserves of 600-700 million tons in Luliang area, with an estimated annual production capacity of about 5 million tons, but it is still in the stage of mining rights. It is estimated that it will take 2 to 3 years to reach production. At the same time, the company participates in Fenxi Ruitai Coal Company, participates in the integration of coal resources in Jinzhong City, and plans to build a large coal mine with an annual output of 12 million tons / year. the improvement of these resource integration effects on the company's performance is not expected to appear until 2011.
Iron and steel business: asset injection is predictable. The company's pig iron production capacity is about 1 million, and all the steel produced is sold to Xintai Iron and Steel, a related company. Xintai has a production capacity of about 1.3 million tons of billet and 400000 tons of pig iron, and plans to build 2 million tons of special steel projects. The company plans to sell 1.04 million tons of pig iron to Xintai in 2009. We estimate that the company's pig iron profit is about 100 yuan / r.
Future stock price catalyst. Xintai Iron and Steel Co., Ltd. injected to strengthen the company's industrial chain; participated in Zhongtai Coal Industry to broaden upstream coal resources; and built projects with an annual output of 200000 tons of coke oven gas to methanol and 100000 tons of dimethyl ether.
Risk factors. The price of coke will be reduced in the future, and the company's main products coke and pig iron are faced with overcapacity in the industry.
Company earnings forecast, valuation and investment rating. Considering the current decline in the coke and steel industry, the company's performance in 2009 is difficult to improve; it is expected that the company's coke and pig iron prices will pick up slightly in 2010 / 11 and contribute part of the current profits after the integration of coal resources, and the company's performance is expected to improve partly. We give the company 2009 / 10 EPS-0.25/-0.01, the target price is 5.60 yuan, and the current price is 8.03 yuan, maintaining the "sell" rating.
