The company's recent situation
On May 30, the company issued the “Letter on Proposing China Coal Energy Co., Ltd. to Implement Special Dividends and Mid-Term Dividends for 2024”. We believe that with the continuous optimization of the company's balance sheet, the company's dividends are expected to gradually increase to better give back to investors.
reviews
1) The dividend ratio is expected to increase. The company plans to distribute a cash dividend of 1.5 billion yuan (based on the company's total share capital of 13,258,663,400 at the end of 2023, and a cash dividend of 0.113 yuan (tax included) per share on the premise of ensuring that the normal operation and long-term development of the company are not affected by the established 2023 annual profit distribution plan. Taking into account the company's previous 2023 final dividend (the proposed cash dividend of about 5.86 billion yuan, corresponding to a dividend of 0.442 yuan (tax included)), the total dividend proposed by the company in 2023 is 7.36 billion yuan, corresponding to a dividend of 0.555 yuan (tax included) per share. In this context, we expect the company's dividend ratio to increase from 30% to 38% in 2023 (corresponding to H shares, increasing from 29% to 36%). We estimate that the total dividend for 2023 (as of the date of publication of the announcement) will correspond to the dividend rate for A shares or increase from 3.4% to 4.2%, and the dividend rate for H shares will increase from 5.2% to 6.5%.
2) The interim dividend shall not be less than 30% of the net profit returned to the mother during the corresponding period. The company proposes to formulate a dividend plan for the mid-term 2024 under the conditions of profit distribution. The recommended dividend amount is not less than 30% of net profit due to mother for the first half of 2024 (net profit under Chinese accounting standards and international accounting standards, whichever is lower), and no more than the net profit due to mother for the corresponding period.
3) It is expected that the level of dividends will gradually increase in the future. We estimate that as of 1Q24, the company's interest-bearing debt may be about 53.2 billion yuan, and the net cash will be about 19.8 billion yuan. Considering that the fundamentals of coal are still expected to remain relatively healthy, we believe that the company's profit and operating cash flow are expected to remain relatively stable and have some resilience. Looking ahead, with the further optimization of the company's balance sheet, we believe that the company can better balance its own investment needs and returns to shareholders, and gradually increase the level of dividends.
Profit forecasting and valuation
We maintain the profit forecast for A/H shares unchanged. The current stock price for A-shares is 9.6x/9.4x for 2024/25E P/E, and 6.0x/5.9x for H-shares corresponding to 2024/25E P/E is 6.0x/5.9x, maintaining the A/H share outperforming industry rating. Considering that the dividend level is expected to gradually increase, we raised the A/H target price by 15%/22% to HK$15/HK$11, corresponding to 2024/25E P/E for A shares, implying 15% upward space, and 7.0x/6.9x for 2024/25E P/E for H shares, implying 17% upward space.
risks
The recovery in demand fell short of expectations; the recovery in supply exceeded expectations.