This report is read as follows:
The profit of the coal business continues to improve, and the decline in the performance of the catalytic company continues to narrow. With the gradual production of power coal mines in Xinjiang mining area, the performance of the catalytic company will continue to improve in the future.
Main points of investment:
Lower earnings forecasts and target prices, and maintain a "prudent overweight" rating. Revenue in the first three quarters was 5.567 billion yuan, net profit returned to the mother was 668 million yuan, and earnings per share was 0.92 yuan, down 12.38% from the same period last year, and the performance was slightly lower than expected. Carefully considering the impact of uncertainty in the impairment of power generation and electrolytic aluminum business, the 2019-20 EPS is reduced to 1.07 yuan 1.15 yuan (the original forecast 1.60 yuan 1.64 yuan), the new 2021 EPS forecast is 1.16 yuan, the target price is lowered to 9.63 yuan (the original target price is 11.00 yuan), corresponding to 2019 PE is 9 times, maintaining the "prudent overweight" rating.
The profitability of the coal business continued to improve, and the decline in the company's performance narrowed. The sales volume of the coal business in the third quarter was 1.2 million tons, with sales revenue of 1.264 billion yuan. The estimated price per ton of coal was 1053 yuan, an increase of 11.1 percent over the same period last year. The cost per ton of coal was 517 yuan, down 1.8 percent from the same period last year. The single-quarter gross profit margin was 51.0 percent, the highest so far this year. The continued improvement in the profitability of the coal business led to a narrowing of the decline in the company's performance (Q1 return net profit year-on-year-28.67%, the first half of the year-20.14%, the first three quarters-11.68%).
Cash flow is at a record high and asset-liability ratios are low. The net cash flow of operating activities was 1.853 billion yuan, up 51.5% from the same period last year, the highest in nearly three years; the scale of interest-bearing liabilities expanded slightly, resulting in an increase in the asset-liability ratio (0.72PCT) compared with the first half of the year, which is still low (41.1%).
The power coal mine under construction in Xinjiang has been put into production, and the performance of the Catalytic Company is good. The 106 mine (1.2 million tons / year, 51% share ratio) and the Weizigou mine (2.4 million tons / year, 80% stock ratio) under construction in Xinjiang mining area have obtained mining licenses and are expected to be completed and put into production in 2020, respectively. At that time, the company's coal production capacity will increase by 14.9% and 25.9% respectively. The significant increase in production capacity and the development of regional thermal coal sales market may catalyze the improvement of the company's performance.
Risk hint. Coal prices have fallen sharply; projects under construction have fallen short of expectations; macroeconomic risks.