Event: On March 29, 2024, the company released its 2023 annual report. In 2023, the company achieved operating income of 7.786 billion yuan, a year-on-year decrease of 7.24%; net profit to mother of 2,036 billion yuan, a year-on-year decrease of 19.43%; and basic earnings per share of 1.697 yuan.
Revenue increased in 23Q4, and profit declined year-on-year. In 23Q4, the company achieved operating income of 1,819 billion yuan, up 11.01% year on year, up 5.16% month on month; net profit to mother was 403 million yuan, down 56.22% year on year and 21.90% month on month.
It is proposed to distribute a dividend of 0.85 yuan (tax included) per share, with a dividend ratio of 50.1% and a dividend rate of 6.9%. The company plans to pay a final dividend of 8.5 yuan (tax included) for every 10 shares to all shareholders, with a total discovery dividend of 1,020 million yuan (tax included), accounting for 50.1% of net profit attributable to mother in 2023. Based on the stock price on March 29, 2024, the A-share dividend ratio will reach 6.9%.
Coal production and sales increased year on year, and the increase in the cost reduction in refined coal prices dragged down profits. 1) Production and sales: In 2023, the company achieved raw coal output of 9.4394 million tons, up 1.07% year on year; commercial coal production was 7.4549 million tons, up 6.07% year on year; commercial coal sales were 7.6,186 million tons, up 8.19% year on year, of which mixed coal/refined coal/block coal/slime sales accounted for 51.6%/37.8%/0.5%/10.1%, respectively. 2) Price: In 2023, the price of the company's tons of coal was 958.1 yuan/ton, a year-on-year decrease of 14.2%. Among them, the price of mixed coal was 541.1 yuan/ton, up 3.1% year on year; the price of washed refined coal was 1703.9 yuan/ton, down 15.9% year on year. 3) Cost: In 2023, the company's sales cost per ton of coal was 517.0 yuan/ton, a year-on-year decrease of 6.1%. Among them, the cost of mixed coal was 317.7 yuan/ton, a year-on-year decrease of 12.0%; the cost of washing refined coal was 842.4 yuan/ton, an increase of 0.4% year-on-year. 4) Benefits: The company's gross margin of commercial coal sales in 2023 was 46.67%, a year-on-year decline of 4.15 pcts. In 2023, the company's Hengyuan coal mine renovation project, Qianyingzi coal mine reconstruction and second-level deepening project, and Hengtai's deepening technical improvement project progressed according to plan. In addition, the company has irrevocable acquisition rights for several mining companies of the Northern Anhui Coal and Power Group, the controlling shareholder. The group has 1.8 million tons of coal production capacity outside the listed companies, and there is plenty of room for the company's coal sector to expand production in the future.
The net profit from equity interests in the power business is negative, and the impact of small scale is limited. In 2023, the company achieved a power generation capacity of 3.356 billion kilowatts, the power business achieved net equity profit of 11.3676 million yuan, and net equity profit of 4.1066 million yuan in 2022. Of the 5 power plants it owns, only Qianyingzi Power Generation and the newly acquired Suzhou Thermal Power achieved profits, contributing a total net profit of 33.6947 million yuan, of which the net profit of Qianyingzi Power Generation's equity fell 16.8% year on year; Suzhou Thermal Power changed from loss to profit year over year, achieving net equity profit of 2.5949 million yuan; the remaining 3 power plants were all in loss. The second phase of the company's Qianyingzi Power Plant project is progressing in an orderly manner. The project has an annual power generation capacity of about 4.8 billion kilowatt-hours and is scheduled to be completed and put into operation by the end of 2024; the Qidong distributed photovoltaic power plant will be put into operation; Wanheng New Energy's 300 megawatt wind power and Huaibei mining area distributed photovoltaic projects have been approved and construction will soon commence.
Investment proposal: The company plans to produce 9.4698 million tons of coal and generate 3.56 billion kilowatts of electricity in 2024. Taking into account the increase in the company's planned output of coal and electricity, but the price of refined coal washing, which accounts for a relatively high gross profit of the company, we expect the company's net profit to the mother in 2024-2026 to be 19.54/20.80/2,215 billion yuan, or 1.63/1.85 yuan/share, respectively, corresponding to the closing price on March 29, 2024, PE is 8/7/7 times, respectively. Maintain a “Recommended” rating.
Risk warning: Coal prices have dropped sharply; the Group's asset injections and ongoing projects have fallen short of expectations.