Key points of investment:
Incident: The Shaanxi coal industry released its annual report for '23 and its quarterly report for '24. The results were in line with expectations. Operating revenue of 23 billion yuan was 17.872 billion yuan, up 2.4% year on year; net profit attributable to shareholders of listed companies was 21,239 billion yuan, down 39.7% year on year; deducted non-net profit of 24.68 billion yuan, down 16.9% year on year. According to the report for the first quarter of '24, revenue for the first quarter was 40.449 billion yuan, down 9.7% year on year; net profit returned to mother for the first quarter was 4.652 billion yuan, down 32.7% year on year; after deducting non-net profit of 5.354 billion yuan, a year-on-year decrease of 26.3%.
The company's coal production grew steadily in '23, and the overall sales price was under pressure. According to the company's announcement, in 2023, the company achieved coal production of 163.724,200 tons, an increase of 4.10% over the previous year. By production area, production in the northern Shaanxi mining area reached 105.8816 million tons, up 1.33% year on year; production in the Binhuang mining area reached 48.3726 million tons, up 9.89% year on year; output in the Weibei mining area reached 9.48 million tons, up 8.03% year on year. On the sales side, the company's self-produced coal sales revenue was 94.036 billion yuan, a year-on-year decrease of 99.82 billion yuan, mainly affected by fluctuations in coal prices. In '23, the sales price of self-produced coal was 574.52 yuan/ton, a year-on-year decrease of 14.12%.
The company's trading coal sales revenue was 56.908 billion yuan, an increase of 6.78 billion yuan over the same period last year. The price of trade coal was 635.56 yuan/ton, a year-on-year decrease of 12.03%.
The company maintained high dividends to return shareholders, and the dividend ratio reached 5.25%. The company plans to distribute cash dividends of 13.15 yuan (tax included) for every 10 shares, for a total cash dividend of 12.749 billion yuan, accounting for 60.03% of net profit due to mother in 2023. Based on the stock price on April 26, 2024, the dividend rate is 5.25%.
In Q1 '24, the company's coal production grew steadily. Affected by the high base in Q1 in '23, the growth rate of Q1 performance in '24 was under pressure.
According to the company's announcement, the company's cumulative coal output in Q1 reached 41.4547 million tons in 2014, an increase of 1.49% over the previous year; it achieved coal sales of 61.463 million tons, an increase of 9.16% over the previous year.
In conjunction with the company's 2023 annual report and 2014 quarterly report, the profit forecast was adjusted to maintain a “buy” rating. Due to the current decline in thermal coal prices compared to the 22-year center, we lowered our 24-25 profit forecast and added a 26-year profit forecast. The estimated net profit for 24-26 was RMB 216.04/249.43/25.093 billion yuan, respectively (the original 24-25 value was RMB 317.84/32.444 billion yuan). The current market capitalization corresponds to 24-26 PE of 11X, 10X, and 10X respectively. Because both China's Shenhua and the company are high-quality domestic thermal coal producers and have outstanding resource factor endowments, the two are comparable. According to iFind's unanimous expectations, China Shenhua's net profit for 24 was 61,455 billion yuan, which is 13 times the PE multiple corresponding to the current stock price. Maintain a “buy” rating.
Risk warning: Major changes in the energy structure; significant release of additional coal production capacity; production safety accidents.