Introduction to this report:
The market share of the coal sector continues to rise, and production capacity will continue to increase in the future; power generation and electricity sales will grow rapidly to expand the renewable energy business; the transportation and coal chemical sector will continue to grow steadily; maintain high dividends and continue to lead the industry.
Key points of investment:
Maintain an “Overweight” rating. The company achieved revenue of 343,074 billion yuan (-0.4%) and net profit to mother of 59.694 billion yuan (-14.3%) in 2023, in line with market expectations. We maintain the 2024-2025 EPS forecast of 3.08 and 3.09 yuan, and add 2026 EPS of 3.19 yuan. In view of the company's high dividends, the company was given a 14x PE valuation higher than that of its peers in 2024, and the target price was raised to 43.12 yuan (+3.08 yuan).
The market share of the coal sector continues to rise, and production capacity will continue to increase in the future. The company's annual commercial coal output is 324 million tons (+3.5%), sales volume is 450 million tons (+7.7%), and its market share continues to increase. Annual long-term cooperation, monthly long-term cooperation and spot sales accounted for 57.5%, 24.4%, and 13%. The average sales price of self-produced coal was 548 yuan/ton (-8.2%), and the unit production cost per ton of coal was 179 yuan/ton (+1.5%). The mining license for the first and second wells of Xinjie has been approved, and the Bolian Tower coal mine and others have obtained new mining licenses. Baode coal mine production capacity increased from 5 million tons/year to 8 million tons/year.
Electricity generation sales are growing rapidly, expanding the renewable energy business. The total annual power generation capacity was 212.26 billion kilowatt-hours (+11%), and the total electricity sales volume was 19.75 billion kilowatt-hours (+11.1%), of which market transaction volume accounted for 97.4% of total electricity sales. The average usage time of a coal-fired generator is 5,221 hours (+270 hours), and the average sales price of electricity is 414 yuan/megawatt-hour (-1.0%).
Maintain high dividends and continue to lead the industry. The company distributed a dividend of 2.26 yuan per share, with a total dividend of 44.9 billion yuan, a dividend rate of 75%, maintaining high dividends and leading the industry. The company's own profit stability has greatly surpassed the industry. Under changes in the supply and demand pattern, the predictability, clarity and stability of future profits will increase. Considering the long-term low interest rate environment in the future and the current asset shortage background, the investment value of high-dividend and high-dividend dividend assets will continue to rise, and we continue to be optimistic about China's Shenhua's valuation reshaping.
Risk warning: The macroeconomy fell short of expectations; coal prices fell more than expected.