It is expected that the relationship between coal supply and demand will be difficult to further relax in 2024. With the arrival of the peak summer season, there is little room for further decline in domestic coal prices; moreover, there are still marginal improvements in economic stabilization policies such as real estate and infrastructure in the later stages, and demand for coal is very rigid.
The Zhitong Finance App learned that Shanxi Securities released a comprehensive analysis report on the 2023 coal industry report and the 2024 quarterly report, saying that it is expected that it will be difficult to further ease the relationship between coal supply and demand in 2024. With the peak summer season, there is little room for further decline in domestic coal prices; moreover, there are still marginal improvement expectations for economic stabilization policies such as real estate and infrastructure in the later stages, and coal demand is very rigid. From the perspective of sector investment value, as market capitalization management positions increase and expectations of a low interest rate environment persist for a long time, “high dividend+state-owned enterprises” valuations are still expected to increase in the later stages, so they maintain the “leading market” rating. It is recommended to focus on investment opportunities in two areas: first, the bottom of coking coal is confirmed, and production in the Shanxi region is expected to be released at an accelerated pace, focusing on relevant targets in the Shanxi region; second, there has been no significant change in the interest rate environment, and companies with “high dividends+integrated coal and electricity” should be more optimistic at this point.
2024Q1 production declined year-on-year
The continuation of the coal insurance policy in 2023 combined with imports exceeding expectations, and domestic coal supply increased year-on-year.
In 2023, the country's coal production reached 4.658 billion tons, up 3.62% year-on-year from last year. Due to factors such as stricter safety inspections in the second half of the year, the annual production growth rate was higher and then lower. The production growth rate in Q3 and Q4 in 2023 was drastically reduced compared to the first half of the year.
Safety inspections have continued since 2024, and production in 2024Q1 was 1,106 billion tons, a year-on-year decrease of 4.12%. From a structural perspective, the main regions contributing in 2023 are still the four production regions of Shanxi, Xinjiang, Inner Mongolia, and Shaanxi. The total increase of the four regions was 146 million tons, accounting for 89.55% of the total increase. In 2023, China's coal and lignite imports reached 474 million tons, an increase of 61.81% year on year; in 2024Q1 coal and lignite imports were 116 million tons, +13.9% year-on-year, but -8.57% month-on-month, the import increase was limited due to low domestic and foreign trade price differences.
In 2023, the average price of the premium Q5500 market in Shanxi was 972 yuan/ton, down 23.37% year on year, but the average price was still 83.18% higher than the 13th Five-Year Plan period; the average price in 2024 Q1 was 908 yuan/ton, -20.20% year over year, and -6.26% month over month, still at a relatively high historical level. The coking coal price center has also declined somewhat, but prices are more resilient. In 2023, the average price of main coking coal in Jingtang Port was 2,283 yuan/ton, -19.62%; in 2024Q1, the average price of main coking coal in Jingtang Port was 2,412 yuan/ton, -4.06% year over month, down somewhat.
In 2024Q1, coal prices fluctuated weakly, and net profit to mother declined mainly year-on-year
In 2023, the sample company's coal production and sales volume mainly increased year on year, but due to falling coal prices and cost rigidity, the sector's net profit fell year on year, but it was still high. At the same time, the dividend ratio further increased; coal prices fluctuated weakly in 2024Q1, and net profit to mother declined mainly year on year.
The 25 listed sample coal companies achieved a total coal production of 1,2001 billion tons, an increase of 7.03% over the previous year, an increase of 4.35 percentage points over the previous year, higher than the increase in national coal production; they achieved coal sales of 1,419 billion tons, an increase of 7.22% over the previous year. Due to falling coal prices, but due to cost rigidity, the average gross profit per ton of coal achieved by coal companies decreased. The average gross profit per ton of coal (simple average) of the 25 sample companies was 271 yuan/ton, a decrease of 25.92% over the previous year. The average net profit of the 25 listed coal companies was 88.87 yuan/ton per ton, a year-on-year decrease of 43.27%. Gross profit of tons of coal and net profit of tons of coal in 2023 are still 71.84% and 108.27% higher than the average during the 13th Five-Year Plan period, and are still in a period of good profitability in history. In 2024, the total revenue of the Q1 coal mining and selection sector was 316.154 billion yuan, -12.61% year on year; total net profit to mother was 40.017 billion yuan, or -34.31% year on year, but it is also relatively high.
Meanwhile, with the improvement of profits in the coal industry, the willingness and dividend ratio of listed coal companies has continued to increase since 2016. After excluding Shenhua in 2023, the total dividend amount of the 24 companies was 62,616 billion yuan, a year-on-year decrease of 23.69%, but the dividend ratio was about 53.24%, an increase of 4.59 percentage points over the previous year.
Coal production and sales are mainly increasing, and revenue and profits have generally declined
In 2023, coal production and sales of listed coal companies generally increased due to the continuation of the coal supply insurance policy, combined with the impact of the increase in nuclear production capacity and the release of additional production capacity in the early stages. However, the coal price center has declined, mainly because the revenue of listed coal companies has declined, and the profitability of listed coal companies has also declined.
The performance of the sample companies in the 2023 report mainly declined year-on-year; judging from the increase in total revenue, the top five companies in 2023 were Xinji Energy, Huaibei Mining, Shaanxi Coal, China Shenhua, and Zhengzhou Coal Power; Yongtai Energy, Jizhong Energy, China Coal Energy, and Xinji Energy recorded net increases in net profit in 2023; the companies that ranked high in 2024Q1 and had positive profits were Yongtai Energy, Jinkong Coal, Haohua Energy, and Xinji Energy. There are three companies that recorded net profit losses in the 2023 report and 2024Q1, namely Xindazhou A, Anyuan Coal and Dayou Energy.
The main content of this article is from a research report published by Shanxi Securities; Zhitong Finance Editor: Wen Wen.