Event: The company released financial results for the first quarter of 2023 and 2024. In 2023, the company achieved operating income of 170.87 billion yuan, +2.41% year on year, net profit to mother of 21.24 billion yuan, -39.7% year on year, 2024Q1 achieved operating income of 404 billion yuan, -9.73% year on year, realized net profit of 4.65 billion yuan, -32.7% year on year, after deducting non-net profit of 5.35 billion yuan, or -26.3% year on year.

The coal business is basically stable:

In terms of production and sales, raw coal production was 164 million tons in 2023, +4.1% year over year; sales volume was 253 million tons, +12.6%, of which 164 million tons of self-produced coal were sold, +5.3% year over year. In 24Q1, the company produced 41.45 million tons of raw coal, +1.5% year over month, +5.1% month on month, sales volume of 61.47 million tons, +9.2% year over month, and -7.9% month on month, of which sales volume of self-produced coal was 40.91 million tons, +1.2% year over month, and +0.7% month on month.

In terms of price, the company's self-produced coal sold for 575 yuan/ton in 2023, -14.1% compared with the same period last year.

In terms of cost, the full cost of the company's tons of coal in 2023 was 297 yuan/ton, a year-on-year decrease of 23 yuan/ton, a decrease of 7.1%.

Coal resource endowments are prominent. The company has abundant coal resource reserves and excellent quality. By the end of 2023, the company had coal reserves of 18.141 billion tons, mining reserves of 10.441 billion tons, and a mining period of more than 70 years. More than 97% of the company's coal resources are located in high-quality coal mining areas such as the northern Shaanxi mining area (Shenfu, Yuheng) and Binhuang (Binchang, Huangling), etc., with low mining costs and obvious production cost advantages. Coal quality is high quality thermal coal, gasified coal, and ideal chemical coal with extra low ash, very low phosphorus, very low sulfur, medium to high calorific value. By the end of 2023, the approved production capacity was 162 million tons, achieving a production capacity of 164 million tons, an increase of 4.10% over the previous year.

Continuously return to the market. According to the company's “2023 Annual Profit Distribution Plan”, it is proposed to distribute cash dividends of 13.15 yuan (tax included) to all shareholders for every 10 shares, and a discovery dividend of 12.749 billion yuan. The company's cash dividend ratio for 2023 is 60.03%. As of the close of trading on April 25, the corresponding dividend rate was 5.2% of the investment recommendations. We expect the company to achieve net profit of 20.7 billion yuan, 22.3 billion yuan, and 23.3 billion yuan respectively from 2024 to 2026, corresponding to PE of 11.8X, 11.0X, and 10.5X, maintaining a “buy” rating.

Risk warning: Coal prices have dropped sharply, coal production is unanticipated, and fair value has changed greatly.