Description of the event
The company released its report for the first quarter of 2024: during the reporting period, the company achieved operating income of 2,051 billion yuan, -8.34% year on year; realized net profit of 431 million yuan, -29.09% year on year; net profit after deduction of 433 million yuan, -27.56% year on year; basic earnings per share of 0.3594 yuan/share, -29.09% year over year; weighted average return on net assets of 3.36%, a year-on-year decrease of 1.16 percentage points. Net cash flow from operating activities was $665 million, or -39.13% year over year. As of March 31, 2024, the company's total assets were RMB 21.515 billion, +1.19% YoY, and net assets were RMB 13.086 billion, +3.84% YoY.
Incident reviews
Q1 Coal production increased, and sales prices and gross profit increased month-on-month. 2024Q1 achieved raw coal production of 2,544,200 tons, +15.07% YoY, +5.33%; commercial coal production of 1.948,800 tons, +11.64% YoY, +3.54% month-on-month; commercial coal sales volume of 1.9171,000 tons, -2.71% YoY and +2.55% month-on-month.
Q1 The company's coal sector revenue was 1.95 billion yuan, -7.75% YoY, +15.10%; gross profit from coal sales was 884 million yuan, -9.98% YoY, 38.09%; the equivalent tonne coal sales price was 1017.15 yuan/ton, -5.18% YoY, +12.24% month-on-month; gross profit per ton of coal was 455.99 yuan/ton, -7.47% YoY, +34.66% month-on-month.
The company has certain location advantages and coal type advantages. The company's coal sector accounts for 97.04% of revenue and 96.45% of gross profit, which is still the main factor in the company's performance. The company is located in Huaibei, in the East China region, in the Yangtze River Delta region, close to the energy demand centers of Jiangsu, Zhejiang, and Shanghai; Anhui Province is also a province with a net transfer of coal and electricity; therefore, under the demand for coal and energy security, the company's capacity utilization rate is high. Meanwhile, coal prices in Anhui Province are relatively strong. The average price of coking and refining coal trucks in Huaibei was 2,044 yuan/ton in 2023, -12.42% year-on-year, a decline far lower than that of the port; in 2024, the average price was 1970 yuan/ton, -17.92% year over month, but +6.49% month-on-month, and the performance was also stronger than the port. The company's mines include various types of coal, such as gas, fertilizer, 1/3 coke, prime focus, and lean coal, and a complete range of products such as thermal coal, jet refined coal, and coking coal blending.
Operating expectations are steady, and continued high dividends are expected to boost valuations. The company plans to produce 9.4698 million tons of coal in 2024, +0.32% year over year. Production is expected to be stable, and the profit scale under current coal prices is expected to be maintained.
Meanwhile, according to the company's 2023 annual report profit distribution plan, the company plans to distribute a cash dividend of RMB 8.5 (tax included) to all shareholders for every 10 shares based on a total share capital of 1,200,004,884 shares at the end of 2023, for a total cash dividend of RMB 1.02 billion (tax included), accounting for 50.1% of the net profit attributable to mother in the consolidated statement, an increase of 2.34 percentage points over the previous year. The company expects a small capital expenditure plan, and the dividend rate is expected to remain high. Based on the company's closing price of 12.8 yuan on April 26, the dividend rate is about 6.64%. In the current low interest rate environment, the company's dividend rate is attractive, which is expected to boost the company's valuation.
Investment advice
The company's 2024-2026 EPS is expected to be 1.68\ 1.73\ 1.77 yuan respectively, corresponding to the company's closing price of 12.8 yuan on April 26, and 7.6\ 7.4\ 7.2 times the 2024-2026 PE, respectively. The company has a certain location and coal type advantage, the company's future production, sales and performance are guaranteed, high dividends increase the dividend rate, and still have a certain investment value in a low interest rate environment; therefore, the first coverage gave it an “increase in holdings -A” investment rating.
Risk warning
The risk that the macroeconomic growth rate falls short of expectations; the risk that coal prices will fall beyond expectations; the risk of falling hours of thermal power use; the risk of electricity prices falling; the risk of safety and generation; the risk that the dividend rate falls short of expectations, etc.