Core views:
Q1 The performance was in line with expectations, and the robustness was superior to that of peers. The company released its quarterly report. Net profit for Q1 was 1.59 billion yuan, -24.7% YoY +36.4%; net profit without return to mother was 1.57 billion yuan, -24.6% YoY /+55.9% YoY. Although Q1's production declined year on year due to the lake mine water permeation accident, and the average sales price also declined, costs and expenses were well controlled.
Q1 Commercial coal sales remained flat month-on-month, sales prices rose 15% month-on-month, and gross profit from the coal business increased slightly month-on-month. According to the operating data announcement, Q1 commercial coal production was 5.24 million tons, -7.7% /month-on-month +0.2%; commercial coal sales volume was 4.03 million tons, -21.1% y/month-on-month -0.2%; tonne coal revenue was 1,176 yuan, -15.2% /month-on-month +14.7%; tonne coal cost 593 yuan, -17% y/month-on-month +22.9%; gross profit per ton of coal was 584 yuan, -13.3% /month-on-month +7.4% month-on-month. According to previous reports, all construction procedures for the Taohutu coal mine have been completed. Construction began in May 2023, and is expected to be completed and put into operation by the end of 2025.
The extension of the chemical industry chain continues to advance, and it is proposed to build 2×660 MW ultra-supercritical coal to expand the scale of integrated coal and electricity. According to the annual report, the company currently has coke production capacity of 4.4 million tons, methanol production capacity of 900,000 tons, and rapid exhaust gas to prepare high-purity hydrogen for vehicles (80 million standard square meters per year). Ethanol production from comprehensive methanol utilization (600,000 tons/year) is in the trial production stage. Construction has begun on projects such as DMC (100,000 tons/year), the coke oven gas separation and deep utilization project, and the carbonate project (30,000 tons/year). The estimated completion times are October '24, March '25, and June '25, respectively. In addition, the company plans to invest in the construction of a 2×660MW ultra-supercritical coal-fired generator project in Lieshan District, Huaibei City, Anhui Province.
Profit forecasting and investment advice. The company is the leading coking coal company in East China. It accounts for a high share of coal sales and has strong steady performance. After the medium- to long-term Taohutu coal mine is completed and put into operation, the company's coal production capacity and output are expected to increase by more than 30% compared to '22, and the extension of the chemical and power industry chains continues to advance. The company's 24-26 EPS is estimated to be 2.42, 2.61, and 2.75 yuan, respectively, giving 9 times PE over 24 years, corresponding to the company's reasonable value of 21.8 yuan/share, maintaining a “buy” rating.
Risk warning. Downstream demand is low, coal chemical prices have fallen beyond expectations, and the progress of new construction projects is low.