Incident: On December 5, 2023, the company announced that the joint trial operation plan for the Hongdunzi Coal Mine, a holding subsidiary of the company, was filed.
The company's approved coal production capacity is 19.3 million tons/year, and it is expected to continue to increase in the future. The company currently has 4 coal mines, including 8.5 million tons/year Gaojialiang Coal Mine and 6 million tons/year Hongqingliang Coal Mine, with mainly non-stick coal and long-flame coal; Hongyi Coal Mine and Hongyi Coal Mine all have production capacity of 2.4 million tons/year and are located in Yinchuan, Ningxia, mainly gas coal. Benefiting from the 2.5 million tonnes increase in production capacity of the Gaojialiang coal mine and the joint trial operation of the Hongyi Coal Mine in 2022, the company's production capacity is increasing year by year, and it is expected to contribute to the increase in production in 2024 after the joint trial operation of the Hongyi Coal Mine. Furthermore, the company has set a target plan to achieve a coal production capacity of 30 million tons by the end of the 14th Five-Year Plan. It is actively seeking high-quality coal mine projects in areas rich in coal resources, and the scale of production capacity is expected to continue to increase in the future.
The decline in coal sales prices combined with an increase in production safety fee calculation standards has damaged 23Q1-3's performance. With 23Q1-3, the company achieved operating income of 6.120 billion yuan, a year-on-year decrease of 10.15%; net profit to mother was 1,011 billion yuan, a year-on-year decrease of 33.87%. In 23Q3, the company achieved operating income of 1,972 billion yuan, a year-on-year decrease of 24.07%, and a month-on-month increase of 3.49%; net profit to mother was 305 million yuan, a year-on-year decrease of 49.97%, and an increase of 8.67% month-on-month.
Coal production and sales have increased, sales prices and costs have all declined, and gross profit has been damaged. 23Q1-3, the company achieved coal production of 127.713 million tons, an increase of 16.61% year on year; coal sales volume was 127.75 million tons, an increase of 16.77% year on year.
23Q1-3, the price of the company's tons of coal was 443.88 yuan/ton, down 23.92% year on year; the cost of a ton of coal was 194.74 yuan/ton, down 12.46% year on year; the gross margin of the coal business was 56.13%, down 5.75 pcts year on year. In 23Q3, the company achieved coal production of 4.2607 million tons, up 2.21% year on year and 4.46% month on month; coal sales volume was 4.2897 million tons, up 1.57% year on year and 5.04% month on month. In 23Q3, the sales price of the company's tons of coal was 436.01 yuan/ton, down 23.57% year on year and up 3.73% month on month; the company cost per ton of coal was 193.63 yuan/ton, down 8.77% year on year and 1.80% month on month; the gross margin of the coal business was 55.59%, down 7.21 pcts year on year, down 2.50 pcts month on month.
The 23Q1-3 methanol business lost money, reduced the volume of special railway lines, increased prices, and decreased gross profit. 1) Methanol: 23Q1-3, the company's methanol production was 219,400 tons, down 25.30% year on year; methanol sales volume was 21,800 tons, down 25.01% year on year; methanol sales price was 1847.33 yuan/ton, down 8.30% year on year; methanol cost was 2252.49 yuan/ton, down 13.20% year on year. 23Q1-3 lost money in its methanol business, with a gross profit margin of -21.93%. 2) Railway: 23Q1-3, the company's special railway line capacity was 4.2042 million tons, down 24.04% year on year; the freight rate was 22.87 yuan/ton, up 2.33% year on year; the cost was 8.52 yuan/ton, up 28.01% year on year. The gross margin of the 23Q1-3 railway dedicated line business was 62.74%, a year-on-year decrease of 7.47pct.
Investment advice: Considering the decline in coal sales prices and methanol business losses dragging down the company's performance, we expect the company's net profit to be 12.54/14.55/ 1,548 billion yuan in 2023-2025, corresponding EPS of 0.87/1.01/1.07 yuan/share, respectively, and the PE corresponding to the closing price on January 18, 2024 will all be 7/6/6 times, respectively, downgraded to a “careful recommendation” rating.
Risk warning: coal prices have dropped sharply; mines under construction have fallen short of expectations.