24Q1 performance was under pressure, and the dividend ratio remained at 60%. In 2023, the company obtained revenue/net profit of 431.4/7.92 billion yuan, -20.6%/-44.1% year-on-year, of which net profit for Q4 was 650 million yuan in a single quarter, -86.7%/-67% month-on-month. In '23, the company plans to pay a cash dividend of 1.59 yuan per share, with a cash dividend ratio of 60% (the same as in '22), based on the closing price of 21.87 yuan on April 22, corresponding to a dividend rate of 7.3%.

24Q1 achieved revenue/net profit of RMB 86.6/1.29 billion yuan, -27.2%/-61.9% YoY.

Profits declined due to the increase in coal volume and price in '23, and the sharp drop in volume and price in 24Q1, and the decline in performance widened. In '23, the company produced 60.46 million tons of raw coal, +6% year-on-year, and commercial coal production/sales volume was 5526/54.98 million tons, +3.8% year-on-year, with injection coal/mixed coal sales volume of 21.62/29.41 million tons, +6%/-0.9% year-on-year. The comprehensive sales price of commercial coal was 728 yuan/ton, -21.8%, of which the price of injected coal/mixed coal was 990/562 yuan/ton, -26.7%/-18.8%; the unit sales cost was 348 yuan/ton, -3.3% YoY, of which the unit cost of injected coal/mixed coal was 489/265 yuan/ton, -4.3%/-2.2% YoY. The 24Q1 company sold 11.81 million tons of commercial coal, -7.1% year-on-year, of which injection coal/mixed coal sales were 459/6.55 million tons, -0.2%/-10.2% year-on-year.

The comprehensive sales price/cost of commercial coal in 23Q1 was 689/378 yuan/ton, -20.7%/+7.6% year-on-year, gross profit margin 45.2%, -14.4pct year on year.

The gross profit margin of coking reached a record low of -16%. The company sold 1.24 million tons of coke in '23, -27.3% year-on-year, comprehensive sales price/unit cost 2260/2615 yuan/ton, -19.2%/-5.8% YoY, and -15.7% gross profit margin (0.7% in '22). Furthermore, the subsidiary Hongfeng Coking confirmed an asset impairment loss of about 40 million yuan. In '24, the company will speed up the disposal of idle assets of Lu'an Coking and Hongfeng Coking, while exploring new paths for comprehensive utilization of coke oven gas and a new model of industrial coupling development.

The production capacity increase procedure is expected to be implemented within the year, and appropriate opportunities will be selected to promote the Group's asset injection. The holding subsidiaries of the company, Heilongguan, Heilong Coal and Cilinshan Coal Mine each purchased a capacity replacement target of 30/30/600,000 tons/year, with a transaction cost of 6750/6750/134.74 million yuan, and a tonnage target cost of about 225 yuan. In 24, the company will speed up the production capacity increase of superior and high-quality mines, and complete the production capacity increase procedures for the four mines in Heilong, Yida, Heilongguan and Cilinshan within the year. At the same time, in accordance with the principle of “being able to fight for everything, we should take all”, we are focusing on market-based bidding for finished resources such as Shanghai and Xiying, and resources to expand the area, such as Wuyang and Houbao, to promote the coal asset injection work of controlling shareholders at the right time. Furthermore, it will focus on three major directions, including intelligent empowerment (that is, intelligent transformation and digital transformation) to promote changes in development methods.

Profit forecasting and valuation. We expect the company's volume reduction and cost increase in 24 years, but the results of cost reduction and efficiency may gradually become apparent after 25 years. Net profit from 24 to 26 was 58.4/61.6/6.7 billion yuan, corresponding EPS was 1.95/2.06/2.24 yuan. Based on comparable company valuations, the company was given 12 to 13 times PE in 24 years, corresponding to a reasonable value range of 23.42 to 25.37 yuan, maintaining a “superior to the market” rating.

Risk warning. Demand has declined sharply, and large amounts of bad debts are ready for settlement.