It is a state-owned enterprise in Anhui Province that integrates coal and electricity. Coal profits are steady, and power projects under construction can be expected to increase. The company was founded in 1994 and listed in 2004. It is mainly engaged in coal mining, washing, transportation, sales and production services. The company is a local state-owned enterprise in Anhui, and the controlling shareholder is Northern Anhui Coal and Electricity Group (55% shareholding). From 2018 to 2023, the coal business contributed more than 90% of revenue and gross profit.
Coal business: Existing mine production profits are steady, and there is room for group assets to be injected. 1) Coal resources: The company is rich in coal reserves. As of 2023, it has 1.1/0.56 billion tons of resources/recoverable reserves, and has an approved production capacity of 10.95 million tons/year, all located in Anhui Province. The Group still has an extracorporeal coal production capacity of 16.6 million tons/year from listed companies (including 10 million tons of Madiliang Mine and 2.4 million tons of Zhaoxian Coal Mine), which is expected to be injected into listed companies after meeting the corresponding conditions. 2) Production and sales: In 2023, the company's raw coal output is 9.44 million tons, YOY +1.1%; commercial coal production/sales volume is 7.45/7.62 million tons, YOY +6.1%/+8.2%, and future production may stabilize. The company's coal customers are mainly concentrated in Anhui Province, and it has established long-term and stable strategic partnerships with large-scale downstream thermal power, steel, building materials and chemical industries. 3) Price: In terms of pricing methods, it is mainly based on Changxie. Thermal coal is adjusted monthly in principle, and refined coal is adjusted quarterly in principle. The comprehensive price of the company's coal in 2021-2023 is 802/1117/958 yuan/ton, YOY +30.7%/+39.2%/-14.2%. Judging from the level of gross margin, the company's coal business profit is relatively stable, and gross profit margin has progressed steadily over the past six years.
Power business: Small units are dragging down electricity profits, and high-efficiency units under construction are progressing steadily. 1) Units in operation: Currently, the company holds the Qiandian Phase I 2*0.35 million kilowatt unit (50% shareholding ratio, not yet listed) and three small units (Hengyuan Coal Mine supporting Huaibei Xinyuan Thermal Power 2×15MW, Renlou Coal Mine supporting Hengli Power Plant 2×6MW, Qidong Coal Mine supporting Chuangyuan Power Plant 2×15MW). The shares in the power plant include Suzhou Thermoelectric 2*0.35 million kilowatt supercritical units (21% share share ratio). In 2023, power business losses narrowed year on year, and Qiandian Company achieved a profit of 62.2 million yuan. 2) Units under construction: The Qianden Phase II 1 million kilowatt supercritical coal-fired unit project (50% shareholding ratio) is currently progressing in an orderly manner.
Green power business: Steadily promote the construction of new wind and solar energy, and promote the integrated development of green power. 1) 0.8 million kilowatt wind project: The company established Anhui Heng New Energy to invest in the construction of the 0.8 million kilowatt wind power project, and construction of the first phase of the 0.3 million kilowatt wind power project has already begun. 2) Distributed photovoltaic projects in mining areas: Actively promote distributed photovoltaic power generation projects in mining areas. The distributed photovoltaic power plant in the Qidong coal mine is running well and is expected to form a replicable profit model for new energy power generation. 3) Capital increase in Suzhou Thermal Power: Investing in the construction of wind energy projects is conducive to the integration of the coal power and new energy industries.
Profit forecasting and valuation. We believe that as a large state-owned coal enterprise integrating coal and electricity in Anhui Province, the company has significant advantages in coal resources and location, and is progressing steadily with high-efficiency thermal power units and green power projects under construction. We expect the company's net profit to be 1.7/2.24/2.28 billion yuan in 24-26, corresponding EPS of 1.41/1.86/1.90 yuan. Refer to comparable companies in the coal sector, and be given 9 to 10 times PE in 2024, corresponding to a reasonable value range of 12.72 to 14.13 yuan. Covered for the first time, giving it a “superior to the market” rating.
Risk warning. Demand has declined sharply; new electricity and new energy projects have fallen short of expectations.