The decline in coal prices in 2023 led to a decline in revenue and a decrease in profits. In 2023, the company achieved revenue of 343.07 billion yuan, -0.4% year-on-year, net profit to mother of 59.69 billion yuan, -14.3% year-on-year, and net profit of 62.87 billion yuan after deducting non-attributable net profit of 62.87 billion yuan, or -10.6% year-on-year. Among them, the 2023Q4 company achieved revenue of 90.61 billion yuan, -3.7% year-on-year, and net profit to mother of 11.43 billion yuan, +8.9% year-on-year. The decline in revenue and profit in 2023 was mainly due to lower coal prices.
Coal business: Production/sales increase, continuing to promote the renewal of coal resources. In 2023, the company produced 324.5 million tons of commercial coal, +3.5% year on year; coal sales were 450 million tons, +7.7% year on year, of which 325.4 million tons of self-produced commercial coal were sold, +2.9% year on year. The average sales prices of self-produced coal and outsourced coal in 2023 were 548 yuan/ton and 679 yuan/ton respectively, down 49 yuan/ton and 110 yuan/ton, respectively. The production cost per unit of self-produced coal was 179.0 yuan/ton, +2.7 yuan/ton over the same period. It is mainly due to an increase in depreciation, amortization, and other costs (production safety costs, divestment fees for open pit mines, etc.). By the end of 2023, the first and second wells of Xinjie in the Taigemiao mining area of Xinjie in Inner Mongolia had obtained mining licenses. The Baode coal mine production capacity was raised from 5 million tons/year to 8 million tons/year, and applications for nuclear capacity increases in coal mines such as Li Jiahao and Shengli No. 1 open-pit mine are progressing in an orderly manner. In 2024, commercial coal production is planned to be 3161 million tons.
Electricity business: Electricity generation/sales increased, and falling coal prices improved costs. In 2023, the company's total power generation capacity was 212.26 billion kilowatt-hours, +11.0% year-on-year, and total electricity sales volume was 19.75 billion kilowatt-hours, +11.1% year-on-year. The average electricity sales price was 414 yuan/megawatt-hour, -1.0% year on year; the unit electricity sales cost was 363.0 yuan/megawatt-hour, -4.7% year over year, mainly due to a decrease in the average purchase price of coal. The average number of hours used by coal-fired generators reached 5221 hours, an increase of 270 hours over the previous year. An additional 4333 megawatts of generator assembly capacity were added throughout the year.
Transportation sector: Overall revenue is stable, and multiple factors affect profit levels. The revenue of the railway division, port division, and shipping division in 2023 was +1.8%/-20.1%, respectively. The decline in shipping business revenue was mainly due to a decrease in average shipping prices; gross margin was -4.4 pct (increase in repair costs and labor costs) /-1.6 pct (increase in depreciation and amortization) /-9.0 pct (decrease in average shipping price), respectively.
The high dividend rate highlights the value of the investment. The company paid a final dividend of RMB 2.26 per share (tax included) for the year 2023, with a dividend payout rate of 75.2%, +2.4pct year-on-year, maintaining a high level.
Investment advice: Since the company's coal sales price was lower than previously expected, the profit forecast was lowered. The net profit due to 2024-2026 is estimated to be 602/611/61.5 billion yuan (the value before 2024-2025 was 625.63.9 billion yuan), and the earnings per share is 3.0/3.1/3.1 yuan. The company is the world's leading coal-based integrated energy enterprise. It has seven business collaboration in production, distribution and marketing, strong performance stability, generous dividend returns, and maintains an “gain” rating.
Risk warning: The economic slowdown has led to a decline in demand for coal, the rapid development of new energy sources to replace demand for coal and electricity, the impact of production safety accidents, the release of the company's nuclear production capacity increase falls short of expectations, and the company's dividend rate falls short of expectations.