Key points of investment
With epitaxial mergers and acquisitions+endogenous growth, the company's production capacity is expected to continue to expand. By the end of '23, the company had a production capacity of 230 million tons/year, of which domestic mines had a production capacity of 121 million tons/year; overseas mines had a production capacity of 109 million tons/year.
The company's past three years of epitaxial mergers and acquisitions have combined endogenous growth, and production capacity has continued to expand. In 2024-2025, with the completion of Wanfu Coal Mine (1.8 million tons/year) and the Wucaiwan Coal Mine (10 million tons/year), we expect a total additional 11.8 million tons of approved production capacity. At that time, the company's approved production capacity will be 242 million tons/year, and equity production capacity will be 148 million tons/year.
Affected by the natural decline in coal resources in the Shandong mining area and the rise in coal capacity in Inner Mongolia mining and Haosheng coal mines, the company's coal mine production is currently below production capacity. In the future, as production gradually increases at the Shilausu Coal Mine and Yingpanhao Coal Mine, the utilization rate of coal production capacity is expected to increase. In addition, the company relies on Shandong Energy Group. By the end of 2022, after excluding listed companies, Shandong Energy Group still had coal resource reserves of 17.75 billion tons, mining reserves of 5.686 billion tons, and an approved production capacity of 92.88 million tons. The group's coal assets are expected to gradually be injected into listed companies, and the company's production capacity can be expected to expand in the future.
The coal market price ratio is high, and high coal prices increase the company's performance. The company's share of Changxie coal is relatively low, only 26% in 2023, while the spot ratio is as high as 74%. Benefiting from this, the company will show high profit elasticity during the upward phase of coal prices. Assuming that the company's average annual sales price in 2024 is the same as in 2023, with no significant change in the cost of tons of coal, we expect Yancoal Australia to contribute 5.921 billion yuan in net profit to mother in 2024. Furthermore, based on the company's comprehensive sales price estimates in 2023, we estimate that the company's domestic coal sector will contribute about 13.1 billion yuan in net profit and the overall profit of the coal sector will be about 19.8 billion yuan in 2014.
International oil prices continue to rise, and coal chemical profits are expected to bottom up. Over the past 24 years, due to OPEC+ and Russian production cuts, global crude oil supply has been tight, and the crude oil price center has been rising and stabilizing above $80 per barrel. As of April 5, '24, the spot price of Brent crude oil closed at $93.52 per barrel, up 7.59% from the 23-year average price of $86.92 per barrel. However, the rise in oil prices provides cost-side support for coal chemical products. Affected by this, the company's coal chemical sector profits are expected to bottom out and rise. According to current price estimates, the net profit loss of the company's coal chemical sector after tax is expected to narrow to 792 million yuan in '24. Benefiting from the improvement in the industry's supply and demand pattern, coal chemical business profits are expected to bottom out and rebound.
A minimum cash dividend dividend is promised, and stable operation and high dividends highlight allocation value. The company promises a 23-25 guaranteed cash dividend of 0.5 yuan/share, and should account for about 60% of net profit after deducting legal reserves. Furthermore, according to the company's “2023 Profit Distribution Plan Notice” on March 28, it is proposed to distribute a cash dividend of 1.49 yuan (tax included) per share and 0.3 bonus shares per share. The total cash dividend amount will reach 11.085 billion yuan (tax included), a dividend rate of 55% for A shares, and a dividend rate of 62% for H shares. As per April 30, 2024, the dividend rate for A shares is 6.45%, and the dividend rate for H shares is 9.46%. The company currently has abundant and stable cash flow, and is expected to continue to maintain a high cash dividend ratio.
Profit forecast and valuation: From the perspective of the PE valuation method, we expect coal prices to operate at a high level in the next 3-5 years. As the largest coal producer in East China, we expect the company's net profit to mother for 24-26 to be 198.28, 212.14, and 22.74 billion yuan, respectively. EPS is 2.67, 2.85, and 2.97 yuan, respectively, and the corresponding PE valuation is 9, 8 times. However, A-shares are mainly comparable to the average PE valuation of companies China Shenhua, Shaanxi Coal, and Guanghui Energy in 24 years, and the corresponding companies still have nearly 14% room for valuation repair. Furthermore, from a dividend rate perspective, assuming a dividend ratio of 60% in 2024, the dividend amount is predicted to be 11.897 billion yuan, and the dividend rate is 6.92% based on the stock price on April 30, 2024; the company operates steadily and has both growth and high dividend attributes, so we expect that in the future, in a low interest rate market environment, the company's dividend rate is expected to drop further to around 5.5%, so there is still room for the company's stock price to rise by nearly 26%. Therefore, consider that the company has both flexible performance and high dividend attributes, so for the first time, coverage was given a “buy” rating.
Risk warning: Domestic economic growth has declined sharply; downstream demand for coal falls short of expectations; due to production safety accidents