We have carried out a field study on the Sanjiao coal mining area. Recently, we have conducted an in-situ study on the three-way coal project held by China National Petroleum Corporation. The Sanjiao area is located at the junction of Shanxi and Shanxi provinces, covering an area of 383 square kilometers. The quantity report issued by Petrochina Company Limited in the area shows that the amount of coal that can be mined is 21.7 billion cubic meters.
The development of the objectives of the Sanjiao coal industry has begun to take shape. At present, there are 58 production wells in Zhongzhong row of Sanjiao area, of which the daily output of single well in horizontal well is as high as 1.6 square meters. The total daily output of the region is close to 150,000 square meters, and a large number of production wells are in the process of increasing production. In the first phase, the CNG master station with a daily capacity of 15 square meters is in operation, which matches the current coal production capacity. The second phase of the project with a capacity of 20 million is in progress. At present, the completed natural pipeline lines include 13.2 km of assembly lines, 11.9 km of external transmission lines and 22.5 km of single-well assembly lines. The construction of the Sanjiao area has grown step by step, and now it has begun to take shape.
There is a strong demand for coal in the lower reaches of the Sanjiao area. At present, the confirmed projects in the Sanjiao area have a demand for 870 million cubic meters of natural gas per year (2.3 million cubic meters per day), including an electric power plant with a daily consumption of 500,000 cubic meters. Weekly glass and chemical enterprises, gasoline filling stations and other industrial and residential appliances. In addition, the national natural pipeline with a design capacity of 3 billion cubic meters per year, the river pipeline and the China Petroleum & Chemical Corp-Yuji line are currently under construction, and these control lines all pass through the third intersection area. Therefore, the exuberant natural demand will support the long-term development of coal and coal production in the third traffic area.
The long-term benefit of the state policy is better than the development of the coal and coal industry. China's natural market is relatively low compared with the international market, so our country's natural market will be in the upward channel for a long time. On June 28, 2013, the National Development and Reform Commission issued a circular on the use of natural railway stations for non-residents in Shanghai. So the company decided to sell the coal from the third delivery area. On the other hand, in order to promote the development of unconventional natural mines, the relevant departments are certifying to raise the coal consumption rate from the current 0.2 yuan per cubic meter to 0.6 yuan per cubic meter. The company will directly benefit from the promotion of natural sales and coal sales.
The company will develop by leaps and bounds in the next three years. Due to the approval of ODP in Sanjiao area, the sales volume of natural oysters in Sanjiao area was only 6.15 million cubic meters in 2012. After receiving a letter from the State Energy Administration in August 12, the development of the Sanjiao region has been on track. It is estimated that the sales volume of coal in 2013\ 14\ 15 reached 0.4\ 1.3\ 33 million cubic meters, showing a great-leap-forward development, and the company's profit level will also be greatly improved. We hold the investment level of "long-term entry". It is estimated that the EPS in 13\ 14\ 15 is HK$0.001\ 0.010\ 0.034. This time, we upload the target HK$0.20 to HK$0.27, corresponding to 27 times 2014PE and 8 times 2015PE respectively. The target 2014PE valuation is too high because the revenue of SMC in 2014 is still in the early stage of development operation, but due to the rapid growth of SMC output, the company's EPS will grow significantly in 2015.