Incident: Recently, the company issued an announcement: 1) Based on the company's current business layout and production capacity and the construction and commissioning of the Haizetan coal mine, the company's initial estimate is that the net profit to the mother is expected to reach 2.8, 3.8, and 5.8 billion yuan; 2) the company's Shaanxi Yihua Mining Development Co., Ltd. and the Haizetan coal mine project 5 billion yuan syndicated loan credit approval were approved; 3) The “Bauxite Survey Design Plan” for 8 mines including the Sendayuan Coal Mine belonging to the company has passed the review by the Shanxi Geological Association and is currently actively promoting geological exploration and geological exploration. Reserve filing and mining rights acquisition; 4) The company plans to issue shares to Xinyi Group to purchase 51.0095% of its shares in Tianyue Coal.

Shaanxi Yihua Haizetan Coal Mine's 5 billion yuan syndicated loan credit approval is conducive to speeding up the construction progress of the Haizetan coal mine project and laying a solid foundation for the early commissioning of the Haizetan coal mine. At the same time, it also reflects the restoration of the company's credit and financing functions, which is expected to effectively optimize the company's financing structure and further promote the company's sustainable and healthy development. After the Haizetan coal mine is put into operation and production capacity is fully released, according to preliminary estimates of the average coal price in the 2023 market, the company is expected to achieve an additional operating income of about 9 billion yuan, an additional net profit of about 4.4 billion yuan, and an additional net operating cash flow of about 5.1 billion yuan, which is expected to significantly increase the company's profit level.

If subcoal bauxite mining rights can be successfully obtained and developed, the company's asset value and operating performance are expected to achieve new increases. According to preliminary estimates, the company is expected to add about 0.116 billion tons of bauxite mining resources. Based on the current market price of about 30 yuan/ton of related resources, it will increase the company's asset value by about 3.5 billion yuan. Based on the current production capacity of the eight coal mines of 6.9 million tons/year, the production cost of aluminum under coal is about 300 yuan/ton, and the sales price of the same type of bauxite products in the surrounding area is about 450 yuan/ton, the company is expected to increase revenue by more than 2.7 billion yuan and net profit by about 0.46 billion yuan each year after developing aluminum under coal.

After Tianyue Coal's shares were acquired and listed, the quality of the company's coking coal assets is expected to further improve. After the transaction is completed, the company will gain control of the Tianyue Coal Industry. The Fengjiatan Mining Area and Dangdangling Mining Area, which were originally divided, will form a “three-mine contiguous” geographical advantage with Tianyue Coal Mine, which can have a scale effect and reduce mining costs; the listed company's high-quality coking coal resource reserves will increase by 28.3696 million tons, and coking coal production capacity can increase by 0.6 million tons/year.

We expect the company's 24-26 net profit of 2.771/3.027/3.285 billion yuan, and earnings per share of 0.12/0.14/0.15 yuan. Referring to comparable companies, maintain the company's 24-year PE valuation of 11 times, maintain the target price of 1.32 yuan, and the “increase in weight” rating.

Risk warning

The progress of projects such as Haizetan may be lower than expected; prices in the coking coal market fluctuate; and there is still uncertainty about the progress of asset acquisitions.