Incident: The company released its 2023 annual report. In 2023, it achieved operating income of 37.371 billion yuan, a year-on-year decrease of 19.45%; achieved net profit attributable to shareholders of listed companies of 4.260 billion yuan, a year-on-year decrease of 38.53%; net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss was 4.408 billion yuan, a year-on-year decrease of 38.23%; achieved basic earnings per share of 2.15 yuan, a decrease of 38.57% year on year; and net operating cash flow was 5.985 billion yuan, a decrease of 58.07% year on year.

The volume of the coal production business has declined, prices have declined, and gross profit remains at a high level. In terms of coal production, revenue of 23.798 billion yuan (-21.34%) was achieved; operating costs were 9.792 billion yuan (-3.05%), and gross profit was 14.06 billion yuan (-30.07%). In terms of production and marketing, in 2023, the company achieved self-produced coal production of 389.837 million tons (-3.92%), of which thermal coal output was 28.9357 million tons (2.94%), metallurgical coal production was 10.48 million tons (-19.39%); self-produced coal sales volume was 34.899 million tons (-5.68%), of which thermal coal sales volume was 266.311 million tons (3.09%), and metallurgical coal sales volume was 8.228,800 tons (-26.04%). In terms of price, the sales price of self-produced coal was 683 yuan/ton (-7.44%), of which the average sales price of thermal coal was 507.96 yuan/ton (-10.21%), and the average sales price of metallurgical coal was 1248.07 yuan/ton (+9.83%). In terms of cost, the cost of self-produced coal is 281 yuan/ton, of which thermal coal costs 190.86 yuan/ton (+28.62%), and the cost of metallurgical coal is 572.25 yuan/ton (+87.47%). In terms of gross margin, the gross margin of the company's self-produced coal was 58.85% (-7.76pct), which is still at a high level.

The cash dividend ratio in 2023 is 30%, and there is a strong certainty that the next three years will be high. According to the company's profit distribution plan for 2023, it is proposed to distribute a cash dividend of 1,289 million yuan, accounting for 30% of the company's net profit returned to the mother in 2023, corresponding to a dividend of 6.50 yuan (tax included) per 10 shares. Based on the closing price of 15.29 yuan on April 8, 2024, the dividend rate is 4.25%. According to the “2024-2026 Shareholder Return Plan” issued by the company in March 2023, the profit distributed in cash for each year of the planning period was not less than 60% of the distributable profit achieved in that year, and a high dividend ratio for the next three years was determined. In addition, the company has good profitability and stable cash flow, the cost of self-produced coal is low, and profitability is outstanding, and we are still optimistic about the company's long-term investment value.

Profit forecast and investment rating: The company's net profit from 2024 to 2026 is estimated to be 40.5/45.0/4.56 billion yuan, respectively, and the PE corresponding to the current stock price is 7.5/6.7/6.7 times. Considering that the company is a high-quality thermal coal enterprise in Shanxi, the cost of a ton of coal is low and the price flexibility is high. The dividend rate is expected to return to 60% in 24-26, maintaining the company's purchase rating.

Risk warning: downstream demand has declined, coal prices have fallen beyond expectations, and coal policies have fallen short of expectations.