Core views

Recently, based on confidence in the company's future development and high recognition of the company's value, the company issued a plan to repurchase the company's shares in order to improve the company's long-term incentive mechanism. We believe that the release of this repurchase plan conveys the company's confidence in its future long-term development and helps enhance the confidence of external investors in the company's future development; implementing employee stock ownership plans or equity incentives is conducive to increasing employees' motivation to work. At the same time, the company issued the “2024 “Improve Quality, Efficiency, and Value Return” Action Plan, which emphasizes integrated coal and power management and comprehensive promotion of key project construction. In terms of the Haizetan coal mine project, based on the average coal price in the 2023 market, it is estimated that the coal mine will increase operating income by about 9 billion yuan and net profit by about 4.4 billion yuan after completion and operation; in terms of the new energy storage business, it is expected that various energy storage projects will be put into operation one after another in 2024 Q4. In addition, the company announced a preliminary increase in 2024 semi-annual results, and the 2024H net profit is expected to increase by 14.54% to 24.41% year-on-year.

occurrences

Yongtai Energy announced the repurchase of the company's shares, a plan to improve quality and efficiency, and a pre-increase in 2024 semi-annual results

Recently, Yongtai Energy announced a plan to repurchase the company's shares. It plans to repurchase some RMB common stock (A shares) shares already issued by the company for employee stock ownership plans or equity incentives.

At the same time, based on actual business conditions and development strategies, the company released the “2024 “Improving Quality, Efficiency, and Valuing Returns” Action Plan, which proposes “continuously optimizing integrated coal and electricity management, comprehensively promoting the construction of key projects, and putting effective emphasis on investor returns, etc., to further promote the company's high-quality development and increase in investment value, and protect the legitimate rights and interests of investors, especially small and medium-sized investors.” The company expects to achieve net profit attributable to shareholders of listed companies in the first half of 2024 of 1.16 billion yuan to 1.26 billion yuan, an increase of 14.54% to 24.41% compared with the same period last year (statutory disclosure data).

Brief review

Repurchasing shares enhances investor confidence, and equity incentives increase employee motivation.

Recently, based on confidence in the company's future development and high recognition of the company's value, the company issued a plan to repurchase the company's shares in order to improve the company's long-term incentive mechanism. The purpose of the company's share repurchase is an employee shareholding plan or equity incentive. The repurchase method is centralized bidding. The repurchase period is within 12 months from the date the board of directors passes the share repurchase plan. The total repurchase capital is not less than 150 million yuan, not more than 300 million yuan. The source of funding is the company's own capital, and the maximum price for the repurchase of shares is no more than RMB 1.89 per share. Based on the maximum repurchase price of 1.89 yuan/share, the number of shares to be repurchased by the company is about 79.37 million shares to 158.73 million shares, accounting for 0.36% to 0.71% of the company's total share capital. We believe that the release of this repurchase plan conveys the company's confidence in its future long-term development, as well as its determination to protect the legitimate rights and interests of shareholders and promote a reasonable return to the value of the company's shares, which will help enhance the confidence of external investors in the future development of the company. At the same time, the company uses share repurchases to implement employee stock ownership plans or equity incentives, so that shareholders' interests, company interests, and employee interests are organically combined, which is conducive to increasing employees' motivation to work.

The construction of the Haizetan coal mine has been accelerated across the board, and the transformation of the energy storage business has continued to advance recently. The company formulated the “Yongtai Energy Group Co., Ltd. 2024 “Improving Quality, Efficiency and Reward” Action Plan based on actual business conditions and development strategies. Specifically, the company will continue to adhere to integrated coal and electricity management to ensure steady growth in business performance. Thanks to the complementary advantages of coal and electricity, the company's 2024Q1 business performance continued to grow, achieving net profit of 467 million yuan to mother, an increase of 11.41% over the previous year. At the same time, the company will comprehensively speed up the construction of the Haizetan coal mine to ensure a significant increase in business performance after three years. After the revised master plan for the southern area of the Yuheng Mining Area is completed, the production capacity of the company's Haizetan coal mine project will reach 10 million tons/year, and the company's coal production scale will double after completion. By the end of May 2024, all four boreholes in the Haizetan coal mine had been excavated and the coal was uncovered. The company expects Haizetan to have coal extraction conditions in the third quarter of 2026 and put into operation in 2027. The construction cycle is 2 to 3 years ahead of the same type of mine in Shaanxi and Mongolia. According to an estimate of the average coal price in the market in 2023, it is estimated that the coal mine will increase operating income by about 9 billion yuan, increase net profit by about 4.4 billion yuan, and increase net operating cash flow by about 5.1 billion yuan after completion and operation. Furthermore, in terms of the energy storage industry, the company is unswervingly transforming into the energy storage industry to build new quality productivity. The company's various energy storage projects will be put into operation one after another in the fourth quarter of this year. After delivery, the two phase 1 production lines will each occupy about 20% of the current domestic market share of coal and vanadium and about 10% of the market share for all-vanadium liquid flow batteries.

The implementation of the plan to increase holdings was completed, and the performance for the first half of 2024 increased year on year. Recently, the company's core management plan to increase their holdings of the company's shares was implemented for the sixth time. From June 11 to June 21, 2024, the company's 29 core management increased their holdings of the company's shares by a total of 138 million shares, accounting for 0.0619% of the company's total shares; the total transaction amount was 167 million yuan, and the average increase price was 1.22 yuan/share.

The personnel involved in this plan to increase their holdings all use their own funds to increase their holdings through the secondary market, which shows the confidence of core managers in the company's business development.

Recently, the company announced a pre-increase in performance. It is estimated that net profit attributable to shareholders of listed companies will be 1.16 billion yuan to 1.26 billion yuan in the first half of 2024, an increase of 14.54% to 24.41% compared with the same period of the previous year (statutory disclosure data); net profit without return to mother will be 1.11 billion yuan to 1.21 billion yuan, an increase of 10.46% to 20.41% over the previous year. The increase in the company's performance in the first half of the year was mainly due to complementary operations in the coal and power business. The electricity business generated a year-on-year increase, the coal business maintained good profit margins, and compounded the year-on-year decline in thermal coal procurement costs. We expect the company's net profit to be 2,561 billion yuan, 2,643 billion yuan, and 3,055 billion yuan respectively from 2024 to 2026, corresponding to EPS of 0.12 yuan/share, 0.12 yuan/share, and 0.14 yuan/share, giving it a “buy” rating.

Risk analysis

The price of coking coal continues to fall: Coking coal products are the company's main source of revenue. Currently, the price of coking coal has dropped significantly from a higher point. If the price of coking coal continues to fall sharply, the company's earnings in the coal sector will decline, and the company's performance in the second half of the year may fall short of expectations.

The price of thermal coal has rebounded sharply: Currently, the price of thermal coal market has clearly declined, and the company's power business has turned a loss into a profit. If there is a sharp recovery in thermal coal prices and the company's power business returns to a state of loss, the company's performance in the second half of the year may fall short of expectations.

Demand for energy storage falls short of expectations: The company is currently deeply involved in the energy storage industry and is making efforts for all-vanadium liquid flow batteries in various fields. If there are major changes in the future energy storage technology route or if demand for energy storage falls short of expectations, the company's future performance growth will fall short of expectations.