The Shaanxi Coal Industry released the 2023 Annual Report and the 2024 First Quarter Report on April 25, 2024:

In 2023, the company achieved operating income of 17.872 billion yuan, a year-on-year increase of 2.41%; net profit to mother was 21.239 billion yuan, a year-on-year decrease of 39.67%; net profit after deduction of 24.68 billion yuan, a year-on-year decrease of 16.89%; and net cash flow from operating activities was 38.598 billion yuan, a year-on-year decrease of 31.25%. Basic earnings per share were 2.19 yuan, up 3.22% year on year; weighted average ROE was 20.73%, down 14.55 percentage points year over year.

In the fourth quarter of 2023, the company achieved operating income of 43.44 billion yuan, up 20.30% year on year and 18.14% month on month; net profit of 5.60 billion yuan, down 25.77% year on year, up 9.97% month on month; net profit after deducting non-return to mother of 5.684 billion yuan, down 17.37% year on year and up 5.96% month on month; earnings per share of 0.52 yuan/share, up 25.71% year on year and 10.64% month on month.

In the first quarter of 2024, the company achieved revenue of 40.449 billion yuan, a year-on-year decrease of 9.73% and a year-on-month decrease of 6.

88%; net profit to mother was 4.652 billion yuan, down 32.69% year on year and 8.06% month on month; net profit without return to mother was 5.354 billion yuan, down 26.33% year on year and 5.81% month on month; earnings per share were 0.48 yuan/share, down 32.39% year on year and 7.69% month on month.

Q1 Production and sales both increased, and trade coal sales decreased month-on-month. In 2023, coal production was 163.724 million tons, up 4.10% year on year; self-produced coal sales were 163.68 million tons, up 5.27% year on year; trade coal sales were 895.42 million tons, up 29.04% year on year. 2023Q4 coal production was 39.457 million tons (-4.44% YoY, -1.85% month-on-month); self-produced coal sales volume was 406.26 million tons (-3.72% YoY, +0.93% month-on-month); trade coal sales volume was 26.142 million tons (+232.66% YoY, +48.55% month-on-month). 2024Q1 coal production was 41.455 million tons (+1 year on year.

49%, +5.06% month-on-month); self-produced coal sales were 409.10 million tons (YoY +1.17%, +0.07% month-on-month); trade coal sales were 20.556 million tons (+29.52% YoY, -21.37% month-on-month).

Coal prices are falling, and profits are weakening. In 2023, coal sales revenue was 165.2 billion yuan, up 1.50% year on year; sales cost was 102.55 billion yuan, up 14.50% year on year; gross sales profit was 62.46 billion yuan, down 14 percent year on year.

45%. The unit sales price was 651.7 yuan/ton, down 9.86% year on year; unit sales cost was 405.0 yuan/ton, up 1.68% year on year; unit gross profit was 246.7 yuan/ton, down 24.03% year on year. 2023Q4 coal sales revenue was 42.05 billion yuan, up 17.00% year on year; sales cost was 25.36 billion yuan, up 69 percent year on year.

28%; gross sales profit was 16.69 billion yuan, a year-on-year decrease of 20.35%. The unit sales price was 629.8 yuan/ton (-12.28% YoY, -7.95% YoY), the unit sales cost was 379.7 yuan/ton (+26.90% YoY), and the unit gross profit was 250.0 yuan/ton (-40.29% YoY).

The fair value of stocks lost a lot, and performance declined under pressure. The profit and loss from changes in fair value of financial assets in the Shaanxi coal industry in 2023 was -4601 billion yuan, an improvement compared with 5.165 billion yuan in 2022. Among them, the profit and loss from changes in fair value of stocks reached -3.481 billion yuan, including Longji Green Energy of -1,392 billion yuan, Jinli Permanent Magnet of -128 million yuan, and Southern Grid Energy Storage of -167 million yuan. Non-recurrent changes had a great impact on the company's performance and suppressed the 2023 results.

The cash dividend ratio reached 60.03%, and the dividend ratio reached 5.21%. On April 25, 2024, Shaanxi Coal and Coal issued the “Notice on the 2023 Annual Profit Distribution Plan”, announcing the proposed discovery dividend of 12.749 billion yuan in 2023, with a cash dividend ratio of 60.03% and a dividend per share of 1.315 yuan. Based on the closing price of 25.22 yuan on April 25, 2024, the estimated dividend rate is 5.21%, and the dividend rate is still very attractive.

Profit forecast, valuation and investment rating: Considering the decline in coal prices, we lowered our 2024-2025 profit forecast. We expect the company's 2024-2026 revenue to be 1853.91, 1893.15, and 191,293 billion yuan respectively, and realized net profit to mother of 221.57 billion yuan, 245.07 billion yuan, and 25.332 billion yuan respectively (the original forecast values for 2024-2025 were 279.57 billion yuan and 30.778 billion yuan, plus 2026 profit forecast). Earnings per share are 2.29, 2.53, 2.61 yuan, the current stock price is 25.22 yuan. The corresponding PE is 11.0X/10.0X/9.7X, respectively, maintaining a “buy” rating.

Risk warning: limited release of coal mine production capacity, sharp drop in coal prices, risk of financial budget overruns, and risk of loss of equity investment.