Matters:
The company released its quarterly report for the year 24. In 24Q1, it achieved revenue of 10.041 billion yuan, a year-on-year decrease of 49.44%; realized net profit attributable to mother of 807 million yuan, a year-on-year decrease of 73.15%; and realized net profit withholding of 774 million yuan, a year-on-year decrease of 73.88%, and an increase of 8.56% over the previous year.
Commentary:
The decline in the scale of production and sales compounded by weak product prices, and the company's revenue in the first quarter fell a lot year-on-year. 1) In terms of coal, supply in the domestic coal market remained relaxed in the first quarter. The 24Q1 Qinhuangdao Q5500 thermal coal liquidation price was 902 yuan/ton, down 6% from month to month; while coal prices in Gansu were generally stable. The Q5500 electric coal truck plate price was 760 yuan/ton, which was basically flat from month to month. Affected by extreme weather and safety inspections, the company's coal production declined in the first quarter. Among them, raw coal/upgraded coal production was -13%/-19% year-on-year to 589/860,000 tons, respectively; sales volume was -1%/+27% year-on-year to 7800/1.22 million tons, respectively. 2) In terms of natural gas, global gas prices continued to decline in the first quarter against the backdrop of high inventories and warm temperatures. Among them, LNG CIF price/domestic LNG ex-factory price were -43%/-25%, respectively. Domestic pipeline gas resources are abundant, and LNG production continues to be high, so the company's natural gas production and sales volume declined in the first quarter, with output/sales volume of -5%/-44% year-on-year to 13.42/821 million tons, respectively.
3) In terms of coal chemicals, the load on related product installations is still recovering steadily. Among them, methanol/coal-based oil/by-product production was -4%/-15%/-3% year-on-year to 29/140,000 tons, and sales volume was -46%/-19%/-49% year-on-year to 28/140,000 tons. The ethylene glycol plant completed technical improvements and delivery at the end of March, and polyester grade products were produced on April 3. The 24Q1 company achieved a gross profit margin of 17.48%, -6.05/+3.25pct year-over-year, respectively; achieved a net profit margin of 7.67%, and -7.31/+6.04pct year-over-month, respectively. The cost rate for the first quarter reached 5.38%, +2.32pct year-on-year, mainly due to an increase in financial expenses.
The profit center may gradually rise, and high dividends highlight long-term allocation value. In 2023, the company plans to pay a cash dividend of 0.7 yuan/share (tax included), with a dividend ratio of 87.9%, +35pct compared to 2022. As of the close of April 25, the current dividend rate reached 9.6%. Considering the gradual implementation of the company's new production capacity, the company's profitability center is expected to increase further. The actual cash dividend distributed by the company is not less than 0.70 yuan/share per year in 2022 to 2024. Subsequent high dividends may be sustainable, and the company's long-term allocation value is expected to gradually become prominent.
The entire hydrogen energy demonstration project has been completed, and the transformation of the green energy strategy has been accelerated. Relying on its own enterprise advantages, the company accelerated the transformation of the green energy strategy, and gradually achieved results in the CCUS and hydrogen energy project layout. Among them, on the CCUS side, the first phase of the 100,000 tons/year demonstration project has been successfully operated, 24Q1 achieved a CO2 output of about 281,000 tons, the 3 million tons/year CCUS project has completed product process route demonstration, and project construction has gradually begun. In terms of hydrogen energy, at present, 10 hydrogen energy heavy truck tractors have fueled a total of 11.4 tons of hydrogen, transported 729 times, and transported a total of 53,400 tons of coal; the hydrogen electrolysis hydrogen production plant of the hydrogen energy demonstration project was successfully operated once, producing qualified hydrogen, with a hydrogen purity of 99.992%. At present, the company's hydrogen energy demonstration project has fully entered the trial production and operation stage. The entire line of hydrogen generation+industrial by-product hydrogen production+hydrogen storage+hydrogen fueling+hydrogen transport+hydrogen use has been completed. While enhancing the company's competitiveness, it will also accelerate the pace of the company's second strategic transformation.
Investment advice: Considering that the Malang coal mine procedures still need to be processed, we lowered the company's 24-year profit forecast to 5.504 billion yuan (previous value was 5.925 billion yuan), and maintained 25-26 net profit forecasts of 6.517 billion yuan and 7.629 billion yuan, respectively, corresponding EPS of 0.84, 0.99, and 1.16 yuan, respectively. The current market value corresponds to the 24-26 PE of 9x, 7x, and 6x, respectively. Using the relative valuation method, referring to the average valuation of comparable companies in the same industry, considering that the company has a clear quantitative logic and has the attributes of high dividends and undervaluation, we gave the company a 24-year 10x valuation, corresponding to a target price of 8.40 yuan, to maintain a “strong push” rating.
Risk warning: large fluctuations in energy prices, geopolitical risks, capacity construction progress falling short of expectations, downstream demand for coal chemicals falling short of expectations, etc.