Performance declined due to falling coal prices and reduced return on investment. 2024Q1 achieved revenue of 45.39 billion yuan, -23.3% year-on-year, net profit of 4.97 billion yuan, -30.6% year-on-year, and net profit without return to mother of 4.89 billion yuan, or -31.4% year-on-year. The decline in 2024Q1 performance was mainly due to a year-on-year decline in coal sales prices and a year-on-year decrease in investment income of participating companies.
Coal sector: Self-produced coal sales are stable. Affected by falling coal prices and rising costs, the gross profit of the coal sector has declined. 2024Q1's commercial coal production was 32.73 million tons, -1.7% year over year; commercial coal sales volume was 63.87 million tons, -14.6% year over year, of which self-produced commercial coal sales volume was 32.31 million tons, -0.8% year over year. The average sales price of 2024Q1's self-produced thermal coal and coking coal was 514 yuan/ton and 1,515 yuan/ton respectively, down 62 yuan/ton and 182 yuan/ton, respectively. The unit sales cost of self-produced commercial coal was 291.0 yuan/ton, +6.8% year over year, mainly due to material costs +7.8% year over year, labor costs +36.1% year over year, and other costs +17.0% year over year.
Taken together, the 2024Q1 coal sector achieved gross profit of 10.13 billion yuan, -23.5% over the same period last year.
Coal chemical sector: Overall sales have declined, raw material prices have declined, and costs have declined. The sales volume of 2024Q1 polyolefin, urea, methanol, and ammonium nitrate was 37.3, 55.1, 39.6, and 130,000 tons, respectively, +2.2%, -14.6%, -21.9%, and +7.4%, respectively. Purchase prices of coking coal and raw methanol have declined, and most product unit costs have declined. The unit sales costs of polyolefin, urea, methanol, and ammonium nitrate were -5.8%, -15.0%, -18.3%, and +20.8%, respectively. The unit sales price of polyolefin, urea, methanol, and ammonium nitrate was -2.9%, -17.7%, -8.6%, and -8.5%, respectively, and the gross sales profit per unit was +19.5%, -23.3%, +77.9%, and -38.9%, respectively.
Coal mine equipment business: It is expected to benefit from capacity reserve policies. The output value of 2024Q1 coal mining equipment was 2.90 billion yuan, -4.9% year-on-year. The capacity reserve policy introduced in April supports the construction of new production capacity, and the coal machine business is expected to benefit.
Projects under construction are progressing smoothly, and the industrial chain layout continues to advance. By the end of 2023, the total investment in the construction of the Libi Coal Mine and Weizigou Coal Mine projects was about 42% and 60% respectively, and both are expected to be put into operation by the end of 2025.
In 2024, it is expected that the Antaibao 2×350MW low calorific value coal power generation project will be completed and put into operation; construction of the Wushenqi Power Plant Project and the Yulin Coal Deep Processing Base Project is scheduled to commence.
Investment advice: Maintain profit forecasts and maintain a “buy” rating.
The estimated net profit for 2024-2026 is 215/219.222 billion yuan, with earnings per share of 1.62/1.65/1.67 yuan. Considering that the company obtained approval for a 10 million tons/year production capacity increase in 2023, future capacity increases are highly certain, and coal prices are expected to remain relatively high, maintaining a “buy” rating.
Risk warning: The economic slowdown has led to a decline in demand for coal, the rapid development of new energy sources to replace demand for coal and electricity, the impact of production safety accidents, the release of the company's nuclear production capacity increase falls short of expectations, and the company's dividend rate falls short of expectations.