Non-net profit after year 23 was -10.6% year-on-year, and the cash dividend ratio reached 75.2%. In 2023, the company's revenue/net profit to mother was 3430.7/59.69 billion yuan, -0.4%/-14.3% year-on-year, after deducting non-net profit of 62.87 billion yuan, -10.6% year-on-year.
Non-operating expenses were 4.1 billion yuan (1.8 billion yuan for the same period in '22), mainly for special remediation in the coal resources sector. Among them, Q4 achieved net profit of 11.43 billion yuan in a single quarter, +8.9%/-23.8% year over year. The main reason for the significant month-on-month decline in Q4 performance was accrued assets and credit impairment (nearly 4 billion dollars), non-operating expenses including special coal remediation (about 4.1 billion yuan), and significant increases in expenses due to settlement reasons. Q4 deducted non-net profit of 15.06 billion yuan, +26.2%/+1.5% y/y. In 2023, the company plans to distribute a cash dividend of 2.26 yuan/share (tax included), totaling 44.9 billion yuan, accounting for 75.2% of net profit due to mother (up from 72.8% in '22, significantly higher than the promised 60%). The dividend ratio for A/H shares corresponding to the closing price of March 22, 2023 is 6%/8.2%.
Coal sector: Self-produced coal sales volume +3% YoY, average sales price -9% YoY, self-produced coal cost +1.5% YoY. 1) Production and sales volume: In 2023, self-produced coal production/sales volume was 325/325 million tons, +3.5%/+2.9% YoY; outsourced coal sales were 125 million tons, +22.6% YoY. Among them, annual sales volume was 259 million tons, +16.8% year over year, accounting for 57.5%/79.5% of total sales/self-produced coal sales, or +4.5/+9.5 pct year on year. The company's production target for 2024 was 316 million tons, -2.6% year over year, but production in January-January was +0.6% year over year. We expect production to remain flat at around 325 million tons in 24. 2) Price: In 2023, the average sales price of the company was 584 yuan/ton, -9.3% year-on-year, of which the average annual and monthly sales price was 500/808 yuan/ton, -2.9%/-7.4% year-on-year.
Q4 The average sales price in a single quarter was 587 yuan/ton, +6.9%/-14.5% month-on-month, of which the average annual and monthly sales price was 483/782 yuan/ton, -5.9%/-3% month-on-month. 3) Cost: In 2023, the unit cost of self-produced coal was 179 yuan/ton, +1.5%, of which labor costs were -16.5% (affected by the assessment and previous year's high base), -9.9% (reduction in repair costs for some open pit mines), depreciation and amortization +9.7% (increase in coal mine production equipment and long-term amortization costs), and other costs including production safety costs and open-pit mine divestment fees +13.9% year-on-year. 4) Profit: The coal sector achieved total revenue/profit of 273.31 billion yuan in 2023, -1.5%/-16.8% year over year, achieving a gross profit margin of 32%, -3.9 pct year on year, mainly due to lower coal sales prices, increased sales volume and procurement costs, and increased self-produced coal costs, including production safety costs, depreciation and amortization.
Profit forecasting and valuation. Looking ahead to 24, the company's annual coal turnover ratio is as high as 80%. The coal profit stability is high, and the new thermal power business is expected to continue to contribute to the increase. The company's net profit for 24-26 is expected to reach 601/603/61.3 billion yuan, and the corresponding EPS is 3.03/3.03/3.08 yuan. Based on the company's 24-year dividend ratio of 75% (same as in '23), the corresponding A/H dividend rates are 6%/8.2%, respectively.
Furthermore, as a large domestic energy state-owned enterprise with leading ESG standards, the company is expected to enjoy a valuation premium with Chinese characteristics. Referring to comparable coal and power companies, the company will be given 14-15 times PE in 24 years, with a reasonable value range of 42.37 to 45.40 yuan, maintaining a “superior to the market” rating.
Risk warning. The price of thermal coal has dropped drastically, electricity prices have been drastically lowered, and environmental security checks are not easy to grasp.