Events:

Jiangxi Coal, a wholly owned subsidiary of Anyuan Coal Industry, recently completed eight mine capacity replacement target transactions that withdrew in 2016, with a total price of 112.4636 million yuan. According to the relevant provisions of accounting standards, Jiangxi Coal Industry recognizes the above transaction payments as current income processing, and it is expected that the net income after deducting the relevant taxes and fees will increase this year's profits.

Comments:

1. Capacity replacement transactions increase profits and losses, but the risk of losses for the whole year remains. After a substantial loss of 2 billion last year, the company continues to be mired in losses. As of the first three quarters of this year, the company's total profit was-90 million. It is expected that the transaction amount in this period will increase the net income by about 110 million yuan and cover the above-mentioned losses. However, considering that the company's coal business remains in the doldrums, according to the China report, it is estimated that the net loss per ton of coal is about 17 yuan, and the company has started the closure plan of Qingshan Coal Mine, and there is still a large amount of asset impairment to be calculated, so it is prudently expected that the company will still be unable to turn losses into profits.

2. A total of 11 pairs of coal mines have been withdrawn in the past two years, and the company has reduced production capacity by 3.28 million tons / year. In the past two years, the company has closed 11 subordinate coal mines, of which 8 were closed in 2016, with a total production capacity of 2.65 million tons / year; this year, 3 mines have been closed, with a total production capacity of 630,000 tons / year. At present, the company holds six mines, and the next step is to withdraw from Qingshan Coal Mine (390,000 tons / year) in 2018, when the approved capacity will be further reduced from the current 2.98 million tons / year to 2.59 million tons / year. According to the company's current trend, the exit capacity index is not used to obtain new high-quality resources.

In 2015, the group promised to inject more profitable mines into the company to solve the problem of competition in the same industry. Combing the group's coal mine assets, the volume of mines in Jiangxi and Guizhou is small, with a total production capacity of only 2 million tons / year, and the injection may be small; the higher quality are the two mines in Indonesia, with a total production capacity of 1.5 million tons / year.

3. Diversification and transformation will take time.

In 2015, the company used part of its coal assets to replace the group's coalbed methane power generation and gas assets, and then set up Jiangxi Energy, material Trade and Jiangxi Coal Reserve Center, trying to build a regional logistics center, in line with the coal-power integration strategy. To achieve diversified transformation and development. However, with reference to the latest China News, its power and goods trading subsidiaries are still losing money. Among them, the coal trading volume of the company's main coal trading plate is less than 1.5 million tons in the first half of 2017, and the port resources of Jiujiang Coal Terminal still have a lot of room for development.

4. Give "prudent recommendation-A" investment rating (downgrade)

It is prudent to predict that the company will lose money for two consecutive years and there is a risk of being ST. Under the influence of the national capacity removal policy, the volume of coal mining in the company's main business continues to shrink, and the transformation and development still takes time. EPS is expected to be-0.17,0.08,0.09 yuan per share in 2017-2019, and the investment rating will be downgraded to "prudent recommendation-A".