On December 26, the coal sector collectively strengthened. As of press release, Orchid Science and Technology has surged by more than 7%, China Coal Energy has risen 3.55%, Yunmei Energy and Yankuang Energy have risen by more than 2%, and Jizhong Energy, Haohua Energy, Shaanxi Coal Industry, and Shanxi Coking Coal have risen one after another.

According to the news, Orchid Science and Technology Innovation released an equity distribution plan for the first three quarters of 2023, and distributed cash dividends of RMB 7.50 per 10 shares to all shareholders, for a total cash dividend of RMB 1,114 billion.

A large dividend of 1.1 billion dollars

On December 25, Orchid Science and Technology Innovation plans to hold the first Extraordinary General Meeting of Shareholders in 2024. The date is January 12. One of the most important items on the agenda of the conference was the issue of dividends of 1.8 billion dollars in net profit from January to September 2023. According to the plan, the company will pay 1.11 billion yuan in dividends, with a cash dividend of 0.75 yuan per share.

The reason it is positive is because the iconic significance of this dividend is that Orchid Science and Technology Innovation is the first coal stock to report dividends in three quarters this year. Based on the closing price of 10.31 yuan yesterday (December 25), the dividend rate reached 7.3%.

According to the 2023 three-quarter report previously released by Orchid Science and Technology, the company's total operating income during the reporting period was 9.604 billion yuan, down 16.08% year on year; net profit was 1,799 billion yuan, down 34.79% year on year. Looking at quarterly data, total operating income for the third quarter was 3.135 billion yuan, down 17.18% year on year, and net profit for the third quarter was 437 million yuan, down 43.43% year on year.

According to the current situation, Orchid Science and Technology Innovation earned nearly 1.8 billion dollars in the first three quarters, and the net profit for the whole year will probably reach 2.4 billion yuan. Currently, the company plans to pay 1.1 billion dollars in dividends, with 1.3 billion remaining. Even if there are no dividends in the fourth quarter, the annual dividend rate can reach 44.68%, far higher than the 35.44% dividend rate in 2022. In the past five years, the company's dividend rates have been 31.71%, 34.47%, 30.49%, 36.42%, and 35.44%, respectively. In 2023, the dividend rate may exceed 40% for the first time.

It is worth mentioning that the coal industry has long been famous for its high dividends and high dividend rates. Pingmei Co., Ltd. issued an announcement on November 28 stating that the board of directors of the company formulated the “Pingdingshan Tian'an Coal Industry Co., Ltd. Shareholder Dividend Return Plan for 2023-2025”. When the conditions for cash dividends are met, in principle, the profit distributed by the company in the form of cash each year is not less than 60% of the distributable profit achieved in the consolidated statement achieved in that year.

China Shenhua also stated during a recent performance briefing that the company attaches great importance to shareholder returns, with a view to establishing long-term stable and trusting investment relationships with shareholders. The company will strictly implement the “Proposal on the Company's 2022-2024 Shareholder Return Plan” reviewed and passed by the shareholders' meeting. The profit distributed in cash in 2023 will not be less than 60% of the company's net profit achieved by the mother this year.

A new round of strong cold air is coming

Recently, many places have cooled down snowfall one after another. According to meteorological monitoring from December 25 to 27, a wave of cold air will affect the region north of the middle and lower reaches of the Yangtze River. North China and Northeast China will have northerly winds of magnitude 4 to 5, gusts of magnitude 6 to 7, and the temperature will drop by 4℃ to 6℃, and the local cooling will reach 8℃. From December 31 to January 1, 2024, a new round of cold air will affect our country. Temperatures in the northern region will drop by 4℃ to 6℃, locally above 8℃, and be accompanied by northerly winds of about magnitude 4.

Against this background, demand for coal has further increased, providing some support for market coal prices.

According to data from the National Bureau of Statistics, from January to November this year, China produced 4.24 billion tons of raw coal, an increase of 2.9% over the previous year; imported 430 million tons of coal, an increase of 62.8% over the previous year. Among them, domestic coal production decelerated markedly in the second half of the year, and the year-on-year growth rate of raw coal production in August and September declined markedly, to 2.05% and 0.4%, respectively.

Zhang Hong, member of the Party Committee and Secretary of the Discipline Inspection Commission of the China Coal Industry Association, said that since this year, the coal industry and enterprises have actively carried out efforts to increase coal production, secure supply, and price stability, and have achieved remarkable results. Production capacity was rapidly released, production increased dramatically, prices were running smoothly, and the East-West situation gradually returned to normal, laying a good foundation for peak winter energy supply and supply.

Looking ahead to the future trend of coal prices, Capital Securities pointed out that due to the recent widespread snowfall across the country, production in some coal-producing areas has been limited, the capacity of railways, automobile transportation, etc. has been clearly affected, and short-term supply has contracted.

In terms of inventory,Affected by the continued rise in downstream demand, port inventories are expected to decline rapidly in the future, which will effectively reduce the pressure on current high inventories and further support coal prices to maintain a high level.

With the arrival of winter, expectations on the demand side may gradually change. Demand brought about by the cold current is expected to be released, and it is determined that the resumption of port transit after the cold current will lead to a rapid decline in port inventories. Port inventories are expected to drop to 25 million tons by January 2024. Looking at the medium to long term, Dongwu Securities maintains an optimistic forecast for coal prices in the first half of 2024. It is expected that coal prices will rise in April 2024, thanks to a recovery in demand and a decrease in imports.