Prices of coal and natural gas have increased and declined, and growth and high dividends can be expected. To maintain the “buy” rating company's 2023 annual report, the company achieved revenue of 61.48 billion yuan, +3.5% year on year; realized net profit of 5.17 billion yuan, or -54.4% year on year; realized net profit of 5.54 billion yuan without deduction to mother, -50% year on year.
Looking at Q4 alone, the company achieved revenue of 11.91 billion yuan, -17.8% month-on-month; realized net profit of 320 million yuan, or -55.7% month-on-month; realized net profit of 710,000 yuan after deduction, or -2.2% month-on-month. Considering the decline in coal prices in the first quarter of 2024, we lowered the 2024-2025 company profit forecast and added the 2026 profit forecast. The company's net profit for 2024-2026 is expected to be 65.5/84.6/9.56 billion yuan (the value before 2024-2025 was 77.5/9.03 billion yuan), +26.5%/+29.3%/+13%, respectively; EPS was 1.00/1.29/1.46 yuan, respectively, corresponding to the current stock price PE is 8.0/6.2/ 5.5 times. As the price of coal and natural gas gradually returns to a reasonable range, the price level will reflect the company's performance in a more reasonable manner, and maintain a “buy” rating, taking into account the flexibility of the Malang coal mine's catalytic performance and the company's high dividend (promised no less than 0.7 yuan per share according to dividends) or sustainability.
Coal and natural gas sales increased year-on-year, and the decline in average prices in the main business dragged down performance (1) Coal sector: The company's coal production and sales increased steadily in 2023, achieving raw coal production/sales volume of 2231.3/258.83 million tons throughout the year, +9.1%/+13.3% year over year, improved coal production/sales volume of 405.8/5112 million tons, +12.2%/+32.5% year over year. (2) Natural gas sector: In 2023, the company achieved LNG production/sales volume of 58,000,000 square meters, -26.1%/+31% year-on-year. With self-produced gas production declining year-on-year, due to a sharp increase in the company's outsourced gas sales, the company still achieved rapid growth in LNG sales throughout the year. (3) Coal chemical sector: In 2023, the company achieved chemical production/sales volume of 204.6/2.633 million tons, -10.6%/-14.6%; of these, it achieved methanol production/sales volume of 91.1/1,113 million tons, -19.1%/-19.6%, ethylene glycol production/sales volume 126/126,000 tons, +24.9% YoY, coal-based oil production/sales volume 65/690,000 tons, +4.4%/+3.7% YoY, coal chemical by-product production/sales volume 35.9/705,000 tons %/ -24.4% With the year-on-year increase in coal and natural gas sales, the overall weakening of domestic energy and chemical product prices in 2023 dragged down the company's performance.
The company's main business can be expected to increase, with high dividends or sustainability (1) Catalyzed for the resumption of production at the Malang Coal Mine: The Malang Coal Mine has obtained capacity replacement approval and licensing from the National Energy Administration, and is currently actively promoting project approval procedures. The resumption of production at the Malang Coal Mine will be a key catalytic factor for the release of the company's flexible performance. (2) Further improvement in LNG turnover capacity: Guanghui Integrated Logistics Company's 6#20 10,000 square meter storage tank construction was completed within the year, and future LNG turnover capacity is expected to be further improved. (3) The drilling work of the Zaisang oil and gas project is progressing at an accelerated pace: the first shallow drilling well in the Permian reservoir of Guanghui Petroleum has been drilled and the injection conditions are in place. At the same time, the second batch of crude oil has been approved in 2024 with an import allowance of 300,000 tons for non-state trade. In 2024, the company plans to deploy 5-10 well groups to drill 40-50 new wells. It is planned to build a production capacity of 30-500,000 tons within the next three years. (4) High dividends are sustainable: In 2023, the company paid a cash dividend of 0.7 yuan/share (tax included), with a dividend ratio of 87.9%, compared to +35pct in 2022, corresponding to the current dividend rate of 8.8%. Considering that in the future, as the company's additional production capacity is implemented, the company's profitability is expected to further increase, and the company's high dividend (actual cash dividend distributed every year in 2024 is not less than 0.7 yuan/share) or is sustainable.
Risk warning: Economic recovery falls short of expectations; sharp drop in energy prices; progress in adding production capacity is lagging behind, etc.