Description of the event
The company disclosed the 2023 annual report. In 2023, the company achieved operating income of 61,475 billion yuan, +3.48% year-on-year; realized net profit to mother of 5.173 billion yuan, or -54.37% year-on-year. Among them, in the fourth quarter, the company achieved operating income of 11.906 billion yuan, or -46.20% year-on-year; realized net profit to mother of 323 million yuan, -89.00% year-on-year.
Incident comments
Prices of major products have dropped significantly, putting pressure on the 2023 results. The global natural gas market slowly recovered in 2023, and the fundamentals of supply and demand tend to be relaxed. The “momentum” for global gas consumption was insufficient due to factors such as inventory and temperature. Disturbed by geopolitical and supply chain risks, natural gas prices in major global markets fluctuated at high frequency and wide range, and prices declined sharply year on year. The average annual price of LNG in Northeast Asia was 16.13 US dollars/million British thermal units, a year-on-year decrease of 52.91%. Coal imports have increased dramatically, with imports of about 474 million tons of coal, up 61.8% year on year; the market supply and demand situation has improved. Coal storage in major sectors of society is at a high level, and the overall coal price center has declined. The average annual closing price of 5,000 kcal thermal coal in Qinhuangdao was 847.57 yuan/ton, a year-on-year decrease of 18.79%. Prices of major products declined, and the company's performance in 2023 decreased by 54.37% year on year, and decreased by 89.00% year on year in the fourth quarter of a single quarter.
Key projects are progressing in an orderly manner, and the coal and natural gas business highlights the company's growth attributes. The Malang coal mine is rich in resource reserves, with resource reserves of more than 1.8 billion tons; the overall coal seam is low ash, high volatile, ultra-low sulfur, ultra-low phosphorus, and medium to high calorific value. According to the “Malang Coal Mine Exploration Coal Quality Test Report”, the Malang coal mine mainly contains more than 6,000 kcal of ultra-high quality raw coal, and the coal seam is shallowly buried, mining costs are low, and it has high development and utilization value. The safety approval data for the Malang coal mine has been reported to the State Mine Safety Supervision Administration for approval; the EIA report acceptance form has been submitted to the Ministry of Ecology and Environment and is being approved. The company currently owns the Baishihu Coal Mine in production, the Malang Coal Mine under construction and the Dongbu Coal Mine, with total recoverable coal reserves of more than 6 billion tons. In addition, the LNG receiving station and supporting projects are progressing steadily. The 6#20 million cubic meter storage tank entered the trial operation stage in April of this year, 2 #泊位建设项目工安全预评价已通过评审，正在向省交通局申请批复阶段；海洋环评等待上会评审阶段。
With permission to import crude oil, the petroleum business is expected to provide additional growth. The company received the “Notice from the Ministry of Commerce on Issuing the Second Batch of Crude Oil Import Allowances for Non-State Trade in 2024”. At present, the S-1003 well, a new well in the shallow Permian injection well network in the Sarybulak main block of the oilfield has been drilled, and the 1022 well group design revisions and the geological design of the 5 wells in the well group have also been completed. The oil and gas project has entered the trial mining phase to provide additional increments.
Focusing on shareholder returns, a cash dividend of 0.7 yuan was distributed per share, corresponding to the latest dividend rate of 8.8%. The company promises that the cumulative profit distributed to common shareholders in cash from 2022 to 2024 is not less than 90% of the average annual profit that can be distributed to common shareholders in the last three years, and a guaranteed dividend of 0.70 yuan/share (tax included). This time, the company issued the “Notice on the 2023 Profit Distribution Plan”, announcing that it plans to distribute cash dividends of 0.7 yuan/share in 2023. The cash dividend amount will reach 4.547 billion yuan, and the cash dividend ratio will reach 87.90%. Based on the closing price of 7.96 yuan on April 19, 2024, the corresponding dividend rate for 2023 is 8.79%, which has a high margin of safety.
EPS is expected to be 0.86, 1.01, and 1.17 yuan respectively in 2024-2026, and PE corresponding to the closing price on April 25, 2023 will be 8.49X, 7.27X, and 6.25X, respectively, maintaining a “buy” rating.
Risk warning
1. The price of coal fell sharply; 2. The price of natural gas fell sharply; 3. The release of new production capacity fell short of expectations; 4. The recovery in downstream demand fell short of expectations.