Description of the event
The company released its semi-annual report for 2023: the first half of 2023 achieved net profit of 3.367 billion yuan, an increase of 30.96% over the previous year; net profit for the second quarter of 2023 was 664 million yuan, a year-on-year decrease of 58.18%.
Incident comments
Lower costs offset the impact of lower coal sales prices, and the gross margin of the coal business has increased slightly. In terms of coal business, the company's coal production was basically stable in the first half of 2023; however, due to falling coal prices, the company's coal business revenue fell 23.81% year on year.
In the first half of 2023, the central price of coking coal declined markedly in the first half of 2023 due to the easing of the global energy crisis, weakening demand, the liberalization of Australian coal imports, and the increase in the number of Mongolian coal customs clearance vehicles. In the first half of 2023, the main coking coal truck price in Hebei was 2,293 yuan/ton, a year-on-year decrease of more than 400 yuan/ton; however, the price of thermal coal produced also declined somewhat due to high inventories and demand pressure, so overall, the company's revenue declined significantly. However, in terms of costs, the company's costs fell by 28.75% in the first half of 2023 due to a decrease in the amount of coal purchased and washed in the current period. As a result, the company's coal business gross margin rose 4.16 percentage points year on year to 39.93%.
The building materials, chemical, and power businesses are dragging down the company's performance, and non-recurring profit and loss have clearly increased the company's performance. Affected by higher raw material prices and increased cost burdens, the gross margin of the company's building materials, chemical, and power businesses all declined: in the first half of 2023, the gross margin of the chemical business fell 3.01 percentage points year on year to 4.41%, the gross margin of the building materials business fell 12.72 percentage points year on year to 17.93%, and the power business continued to lose money. However, thanks to the sale of all shares held by the company in Hebei Jinniu Chemical Co., Ltd., an increase of about 1.5 billion yuan in non-recurring profit and loss, the company's performance in the first half of 2023 increased significantly: the company achieved performance of 3.367 billion yuan in the first half of 2023, an increase of 30.96% over the previous year.
Stricter safety supervision is expected to lead to stable performance in 23Q3. Affected by recent frequent accidents at production sites, the price of coking coal has rebounded since 23Q3 due to stricter safety supervision. Currently, the price of main coking coal vehicles in Hebei is 1,820 yuan/ton, an increase of about 100 yuan/ton compared to the end of June.
Looking ahead to the third quarter, the company's performance is expected to stabilize.
The dividend ratio reached 79%, and the undervalued value of high dividends was highlighted. Considering that the company's overall capital expenditure has been stable in recent years, and the central rise in coal prices has increased the pressure on shareholders to repay their debts, the company's dividends are expected to remain high; in the “2023-2025 Shareholder Return Plan” issued by the company, “the profit distributed in cash each year in the future is not less than 35% of the distributable profit achieved in that year” also provides a certain guaranteed income. At the valuation level, the valuation safety cushion corresponding to the company's current stock price is obvious, and the low valuation value of high dividends is prominent.
From a growth perspective, the company still has room for volume growth. Within listed companies, 600,000 tons of Xijing, a mine under construction, is expected to be put into operation in the second half of 2023. The coal type is 1/3 coke, which is expected to bring an increase in production of 100,000 to 300,000 tons at that time; in addition, the 1.5 million ton nuclear increase in production capacity in the Inner Mongolia mining area in '22 may also increase the company's coal production to a certain extent in '23. At the group level, there are still unlisted coal mines with a production capacity of more than 20 million tons and 10.1 million tons under construction. Looking to the future, the group's mines may become the company's reserve assets, or become the driving force for the company's continuous improvement in performance.
Investment advice and valuation: The company's EPS is expected to be 1.25 yuan, 1.11 yuan, and 1.15 yuan respectively in 2023-2025, and the corresponding PE is 5.05 times, 5.70 times, and 5.48 times, respectively, maintaining the company's “buy” rating.
Risk warning
1. The slowdown in macroeconomic growth affects coal demand;
2. The release of new coal production capacity in the industry has a large impact on coal prices.