Incident: On April 25, 2024, the Shaanxi coal industry released its 2023 report and 2024 quarterly report. In 2023, the company achieved operating income of 170.9 billion yuan, +2.41% year on year; net profit from mother of 212 billion yuan, or -39.67% year on year; net profit after deduction of 24.7 billion yuan, -16.89% year over year; and net cash flow from operating activities of 38.6 billion yuan, or -31.23% year on year.
The company achieved operating income of 404 billion yuan in the first quarter, -9.73% YoY, -6.89%; realized net profit of 4.65 billion yuan, -32.69% YoY and -8.05% month-on-month; net profit after deduction of 5.35 billion yuan, -26.32% YoY and -5.81% YoY.
Comment:
Coal production has maintained a steady trend, and cost reduction and efficiency have promoted the company's efficient development. In 2023, the company achieved coal production of 164 million tons, +4.1% year on year; coal sales volume was 253 million tons, 12.6% year on year, of which 164 million tons of self-produced coal were sold, +5.3% year over year. In terms of price, the company achieved coal sales revenue of 165 billion yuan, +1.5% year over year; self-produced coal sold at 575 yuan/ton, -14.12% year over year, and traded coal sold at 636 yuan/ton, -12.03% year over year. In terms of cost, the company achieved a coal sales cost of 102.6 billion yuan, +14.5%; the full cost of self-produced coal was 297 yuan/ton, -13.04% year-on-year, and the cost of trade coal was 677 yuan/ton, -10.6% year-on-year. The company actively promoted “big cost” control, achieved a year-on-year decrease in the total cost of coal mining, and promoted the continuous and efficient development of the enterprise.
In the first quarter of 2024, the company achieved coal production of 41.45 million tons, +1.49% year over year; coal sales volume was 61.47 million tons, +9.16% year over year, of which 40.91 million tons of self-produced coal were sold, +1.17% year over year.
Against the backdrop of a contraction in national coal production, the company's coal production continued to grow steadily in the first quarter thanks to its excellent coal resource endowment, few natural disasters, and good storage conditions.
The “Improve Quality, Increase Efficiency, and Value Return” plan was issued, which attached importance to investors' interests and demonstrated confidence in the company's long-term development. The company announced the 2024 “Improving Quality, Efficiency and Increasing Return” action plan, which will enhance the company's investment value by improving the quality of operations, increasing investor returns, and strengthening investor communication. In 2024, the focus will be on strengthening the main business and improving operational efficiency and profitability. In terms of operation management, the company insists on improving quality and efficiency, speeding up the implementation of the “Four in One” high-cost hierarchical management system, and achieving safe and efficient scientific cost reduction. In terms of cultivating high-quality production capacity, the company actively promoted preliminary work on the Little Hou Tu 1 and Little Hou Tu Western Exploration Area projects to accumulate momentum for sustainable development.
The company's capital expenditure and liabilities have declined, the money in hand is abundant, and the potential for future dividends is worth looking forward to.
In terms of capital expenditure, in 2024, the company's capital expenditure plan is 2,333 billion yuan, mainly for projects such as Xiaobaodang, Shenwei Pipeline, Hujiahe No. 2, and Lijiagou. The 2024 capital expenditure plan decreased by 2.2 billion yuan compared to 2023, -48% year over year. In terms of debt, as of the end of the first quarter of '24, the company's balance ratio was 34%, which has fallen to its lowest level since 2016, and the company's short-term loans have been fully repaid, and long-term loans are only 2.9 billion yuan. At the same time, the company has sufficient monetary capital. As of the end of 2024Q1, it has a monetary capital of 28.2 billion yuan, and the company has excellent ability to continuously generate cash flow. In terms of dividends, in 2023, the company announced a cash dividend of 12.7 billion yuan, with a dividend rate of 60%. Based on the closing price of April 26, the dividend rate is 5.25%. Against the backdrop of a decline in the company's capital expenditure, a reduction in investment business, and a focus on the main coal industry, the company's future dividend potential is worth looking forward to.
Profit forecast and investment rating: We believe that in the context of continuing high energy inflation, the domestic thermal coal price center is expected to operate at a medium to high level. At the same time, the Shaanxi coal industry has high quality coal resources in northern Shaanxi. Over the long term, there is plenty of room to release production, and the company has broad prospects for future development. We expect the company to achieve net profit of 235/250/26.7 billion yuan in 2024-2026; EPS is 2.42/2.57/2.75 yuan/share, maintaining a “buy” rating.
Risk factors: There is uncertainty about the macroeconomic situation; geopolitical factors affecting the global economy; uncertainty about coal and electricity-related industry policies; production safety accidents in coal mines, etc.