The consumption volume of Hengding practice decreased greatly in the first quarter of 2013. According to the announcement, the company completed only 320,000 tons of raw coal in the first quarter of 2013, down 69 percent from the same period last year, 168,000 tons of refined coking coal, 49 percent less than the same period last year, and 13,000 tons of coke, down 72 percent from the same period last year. In terms of product sales, in the first quarter, the company's sales of refined coking coal were 1111 yuan / yuan, down 16% from the same period last year, and coke sales were 1571 yuan / yuan, down 4% from the same period last year.

The shutdown of the crisis seriously affected the volume in the first quarter. According to the data of the first quarter's experience, the company's five mining areas and nine coal mines in Yunnan Province were forced to shut down for the whole of the first quarter due to accidents involving coal fired by other local companies. as a result, the company's coal mines located in Sichuan and Southwest China did not realize raw coal production in the first quarter. At the same time, the company's 10 raw coal mines in Guizhou Province were also affected by the coal mine accident on 12 March and were forced to stop selling for several days. in the first quarter of this year, the company's raw coal production capacity in Guizhou Province was only 320,000 tons, compared with a decrease of 19% in the same period last year. In addition, the coal mine under construction has also been affected, resulting in the suspension of construction and rectification, and the progress of the company's production capacity will also be affected to a certain extent.

At present, coal production has gradually returned to normal, and coal production will pick up in the second quarter. According to the company's announcement, the coal mines located in Guizhou Province and Yunnan Province returned to normal by the end of March, and two of the five mining areas in Sichuan Province have passed the mining process. In the second quarter, the company will return to normal health one by one, and the company has not adjusted the previous target of 330-350 tons of raw coal for the whole year.

I am afraid that the price of coking coal will continue to decline, and the company is expected to make a profit of 13 / 14. Due to the unclear signs of economic recovery in Acer, coupled with the state's new real estate control measures, weak demand in the lower reaches of the market has led to a continued decline in the market. As a result, coking coal has also seen an obvious decline since April, and there is still room for downside in the future. According to the general trend of the company's product sales and future coking coal sales in the first quarter, we have reduced the average sales of refined coking coal to 1100 yuan and 1155 yuan per kilogram and coke to 1500 yuan and 1620 yuan per kilogram in 13 / 14. After that, the company's profit forecast for 13 / 14 years has increased from 0.06 / 0.14 yuan / share to 0.04 / 0.10 yuan / share.

The company maintains the "sell" investment level of the company. We believe that the company's 2013 operating conditions are unfavourable, and maintain the company's "sell" investment grade, which corresponds to 0.34 times the 2013 PB. We hold the HK$1.48 target.