Event: On April 22, 2024, the company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved operating income of 13.284 billion yuan, a year-on-year decrease of 6.16%; net profit to mother was 2,098 billion yuan, a year-on-year decrease of 34.93%. In the first quarter of 2024, the company achieved operating income of 2,262 billion yuan, a year-on-year decrease of 25.03%; net profit to mother was 135 million yuan, a year-on-year decrease of 82.55%.
In 2023, four fees were drastically reduced, and falling coal prices, increased costs, and preparation for depreciation of assets dragged down performance.
In 2023, the company's total four fees decreased by 492 million yuan year on year, a decrease of 24.7%, but the company's profit was dragged down by factors such as a significant year-on-year decline in coal prices, an increase in the company's external mining insurance and supply, higher costs of newly put into operation and integrated mine tunneling and development expenses, and an estimated asset impairment preparation of 101 million yuan.
24Q1 profits were damaged due to falling coal prices, reduced investment income, and a sharp increase in income tax rates. The decline in coal sales prices in 24Q1 reduced gross profit by about 884 million yuan, the profit of the participating company Yamei Daning decreased by 109 million yuan year on year, the corporate income tax rate increased sharply by 38.23 pcts year on year to 61.42%, reducing net profit by about 78 million yuan, and financial expenses increased 45.70% year over year, or 18 million yuan. Considering that Tongbao and Qinyu are in a phase where production capacity is climbing or dragging down profits, the company's net profit to mother fell sharply by 82.55% year on year.
Cash dividend for the first three quarters was 53.10%, with a dividend ratio of 7.0%. 23Q4 Company plans to no longer distribute cash dividends. The company implemented profit distribution for the first three quarters of 2023 on February 8, 2024, and distributed a cash dividend of 0.75 yuan (tax included) per share to all shareholders, with a total cash dividend of 1,114 billion yuan (tax included), with a dividend ratio of 53.10%. Based on the stock price on April 22, 2024, the dividend rate was 7.0%.
Profits in the coal business have been damaged, and there is plenty of room to expand production in the future. 1) 2023: Benefiting from 2.4 million tons/year Yuxi mine production and 900,000 tons/year Tongbao and Qinyu mine joint trial operation, the company achieved coal production and sales volume of 1380/12.99 million tons, +20.46%/+11.65%; tons of coal sold at 739.1 yuan/ton, down 21.75% year on year; ton coal cost was 327.6 yuan/ton, up 10.23% year on year; unit gross margin was 55.68%, down 12.86 pcts year on year. 2) 24Q1: The company achieved 3.12 million tons of coal production and sales, up 6.96% year on year, down 17.96% month on month; coal sales volume was 2.38 million tons, down 4.46% year on year, down 40.58% month on month; the price of tons of coal was 631.5 yuan/ton, down 30.33% year on year, down 11.73% month on month; ton coal cost was 365.4 yuan/ton, up 22.74% year on year, down 3.00% month on month; unit gross margin was 42.13%, down 25.02 pcts year on year, down 5.21pct month on month. The company's Tongbao and Qinyu mines were officially put into operation in November 2023 and January 2024 respectively. The 900,000 tons/year Baisheng Coal Industry entered joint trial operation in March 2024, and the 900,000 tons/year Luhe Coal Phase II project is also progressing in an orderly manner, aiming for joint trial operation in September 2026. The Tongbao and Qinyu mines were still at a loss in 2023. With the gradual release of production in '24, profitability is expected to improve.
In 24Q1, urea production and sales declined month-on-month due to the discontinuation of production and emission reduction, and gross margin increased due to a sharp drop in costs.
In 2023, urea production and sales volume of 96.78/977,500 tons was achieved, +18.92%/+19.16%; the comprehensive sales price was 2249.9 yuan/ton, down 8.73% year on year; unit cost was 1870.8 yuan/ton, down 11.63% year on year; unit gross margin was 16.85%, up 2.73 pct year on year. 24Q1 achieved production and sales volume of 22.11/193,400 tons, +1.05%/-6.16% YoY, +1.10%/-19.92%; comprehensive sales price 2028.3 yuan/ton, -20.12%/-9.90%; unit cost 1579.2 yuan/ton, -30.45%/-10.79% YoY; unit gross margin was 22.14%, +11.57/+0.77pct YoY. In 2023 and 24Q1, benefiting from a significant reduction in costs, the company's caprolactam business lost year-on-year and month-on-month. Affected by market and environmental factors, the company's dimethyl ether company has basically stopped production.
Investment advice: Considering the sales price of the company's coal and coal chemical products in 2024, we expect the company's net profit to be 13.15/19.41/2242 billion yuan in 2024-2026, corresponding EPS of 0.89/1.31/1.51 yuan/share, respectively, and the PE corresponding to the closing price on April 22, 2024 will all be 12/8/7 times, respectively, downgraded to a “careful recommendation” rating.
Risk warning: Coal prices have dropped sharply; the commissioning of mines under construction falls short of expectations.