Incidents:
On April 26, Yongtai Energy released its 2023 annual report and report for the first quarter of 2024: in 2023, the company achieved operating income of 30.12 billion yuan, -15.3% year on year, net profit attributable to shareholders of listed companies of 2.27 billion yuan, +18.7% year-on-year, and net profit attributable to shareholders of listed companies after deduction of 2.36 billion yuan, +41.7% year-on-year. Basic earnings per share were $0.102, +18.74% YoY. The weighted average ROE was 5.0%, up 0.60 percentage points year over year.
On a quarterly basis, in the fourth quarter of 2023, the company achieved operating income of 8.14 billion yuan, +1.8% month-on-month, -6.4%; realized net profit attributable to shareholders of listed companies of 640 million yuan, +5.0% month-on-month and +74.5% year-on-year; realized net profit of 740 million yuan after deduction, +21.1% month-on-month and +96.8% year-on-year.
In the first quarter of 2024, the company achieved operating income of 7.32 billion yuan, +3.6% year on year; realized net profit attributable to shareholders of listed companies of 4.7 billion yuan, +11.4% year on year; realized net profit of 4.7 billion yuan after deduction, +12.0% year on year.
Investment highlights:
The main coal industry compensates for its price by volume. In terms of production and sales volume, in 2023, the company's Yinyu Coal Mine and Fujuyuan Coal Mine resumed production in the first quarter. The company's production and sales increased year-on-year, achieving annual raw coal production of 12.97 million tons, +18%, raw coal sales of 12.99 million tons, +18% year-on-year, 3.28 million tons of refined coal, -3% year-on-year, the comprehensive sales price of commercial coal tons was 956 yuan/ton, -23% YoY.
In the first quarter of 2024, price decline continued to drag down profits. During this period, the company's raw coal production was 2.4 million tons, +0.5% year over year, raw coal sales volume was 2.37 million tons, -2% year over year, the comprehensive sales price of tons of coal was 918 yuan/ton, -17% year over year, the comprehensive cost of tons of coal was 400 yuan/ton, -0.2% year over year, and the comprehensive gross profit of tons of coal was 518 yuan/ton, -26% year over year.
It has fully benefited from the reduction in feedstock costs, and the profit of the thermal power business has improved markedly. In 2023, the company achieved 373.5/35.39 billion kilowatt-hours of electricity generation and sales respectively, with a unit sales price of 0.4722 yuan/kilowatt-hour (+2% year over year), and a unit cost of 0.4217 yuan/kilowatt-hour (-15% year over year), mainly due to the year-on-year decline in the price of purchased thermal coal. As a result, the power business turned a loss into profit and achieved gross profit of 1,786 billion yuan, and a loss of 1.08 billion yuan in the same period last year.
The production capacity of the Haizetan project has increased significantly. The company is constructing the Haizetan coal mine, which has 1,145 million tons of high-quality coal resources. The main types of coal are high-quality chemical coal (long-flame coal, non-stick coal and weakly viscous coal) and thermal coal, with an average calorific value of 6,500 kcal or more. The company plans to have coal production conditions in the third quarter of 2026 and achieve production in 2027. At the same time, as a project approved by the National Energy Administration as an advanced production capacity project, the future production capacity is expected to increase to 10 million tons/year. After fully releasing production capacity, it can achieve annual operating income of about 9 billion yuan and net profit of about 4.4 billion yuan according to preliminary estimates of the average coal price in the 2023 market.
The energy storage transformation project started as scheduled, and production line construction was promoted in an orderly manner. Dunhuang Huihong Mining Development Co., Ltd., which belongs to the company, began construction of the 6,000 tons/year high-purity vanadium pentoxide metallurgical production line (3,000 tons/year) at the end of June 2023. The first phase of the project is expected to be put into operation in the fourth quarter of 2024; the 1,000MW all-vanadium liquid flow battery energy storage equipment manufacturing base (phase I, 300MW) is expected to be put into operation in the fourth quarter of 2024.
Profit forecast and investment rating: We expect the company's revenue for 2024-2026 to be RMB 330.6/332.2/33.37 billion, respectively, +10%/+0%, and net profit to mother of 24.3/26.1/2.83 billion yuan, respectively, +7%/+8%; EPS will be 0.11/0.12/0.13 yuan, respectively, corresponding to the current share price PE of 12/12/11. Considering that the company's electricity business has turned losses into profits, the company's growth rate is high in the future. On the one hand, the Haizetan mine is expected to be put into operation, there is plenty of room for capacity growth, and the energy storage transformation project will start as scheduled, which is expected to inject new vitality into the company's performance growth and maintain a “gain” rating.
Risk warning: risk of a sharp drop in coal market prices; risk of production safety accidents; risk of coal mine production progress falling short of expectations; risk of vanadium battery transformation falling short of expectations; risk of power plant power generation falling short of expectations; risk of power plant power generation falling short of expectations; risk of company management and operation risks.