Incident: Huaibei Mining released its 2024 quarterly report: In the first quarter of 2024, the company achieved operating income of 17.322 billion yuan (-8.8% YoY, -3.0% month-on-month), net profit to mother of 1,590 billion yuan (-24.70% YoY, +36.3%), and net profit to mother after deduction was 1,565 billion yuan (-24.57% YoY, +55.9% YoY). Basic earnings per share were 0.64 yuan/share (-25.17% YoY), and the weighted average return on net assets was 4.16% (-1.97pct YoY).
Comment:
Coal business: Sales declined in the first quarter, and gross profit per ton of coal increased month-on-month. According to the company's main operating data announcement for the first quarter of 2024, 1) Production and sales volume: In 2024Q1, the company's commercial coal production was 5.2364 million tons (-7.73% YoY), and commercial coal sales volume was 4.0261 million tons (-21.08% YoY). 2) Price: In 2024, the company sold 1,176 yuan/ton of coal in Q1 (-15.2% YoY, +14.7% YoY).
3) Cost and profit: In 2024, the company's cost per ton of coal was 593 yuan/ton (-17.0% YoY, +22.9%), and the gross profit per ton of coal was 584 yuan/ton (-13.3% YoY, +7.4% month-on-month).
Overall, Q1 coal business sales revenue in 2024 was 4.737 billion yuan (-33.07% YoY), sales cost was 2,386 billion yuan (YoY -34.51%), gross profit was 2.350 billion yuan (YoY -31.56%), and gross margin was 49.6% (up 1.1 pct YoY).
Coal chemical business: methanol production and sales declined year on year, and prices of major products fell year on year. According to the company's main operating data announcement for the first quarter of 2024, 1) Production and sales volume: In 2024Q1, the company's coke production was 886,300 tons (+0.15% YoY), coke sales were 863,400 tons (-0.25% YoY); methanol production was 90,500 tons (YoY -42.65%), and methanol sales volume was 81,300 tons (YoY -46.19%). 2) Price: The average sales price of the company's coke in 2024Q1 was 2311.81 yuan/ton (-13.78% YoY); the average sales price of methanol was 2161.71 yuan/ton (-4.39% YoY). 3) Purchase volume: In 2024, the company purchased 1,213,200 tons of refined coal (-2.87% YoY), consumption was 1.288,700 tons (+4.14% YoY), and the unit cost was 1793.31 yuan/ton (-17.16% YoY).
Profit forecasting and investment advice. We recommend Huaibei Mining based on the following three aspects: 1) The company is a major coking coal enterprise in East China. It has rich resource reserves, excellent coking coal quality, and obvious location advantages. 2) The company deepens its business layout and continues to promote the integration of the coal and coal chemical industry chains. 3) The company's projects under construction are progressing steadily, and there is still room for growth in production capacity. We expect the company to achieve operating income of 74.242 billion yuan, 75.515 billion yuan, and 77.012 billion yuan in 2024 to 2026, net profit to mother of 6.548 billion yuan, 7.027 billion yuan and 7.815 billion yuan, EPS (diluted) of 2.43 yuan, 2.61 yuan, and 2.90 yuan, corresponding PE of 7.4x/6.8x/6.2x at a closing price of 17.87 yuan/share on April 26, 2024, maintaining the company's “gain” rating.
Risk warning: The progress of construction projects fell short of expectations, production safety accidents occurred in key coal mines, coal prices fell beyond expectations, and safety and environmental protection policies became stricter.