Key points of investment

Incident: 1) The company issued a business performance forecast announcement for 2025 to 2027. Net profit attributable to shareholders of listed companies is expected to be 2.8, 3.8, and 5.8 billion yuan respectively in 2025-2027; 2) Announcement that the company's Shaanxi Yihua Mining Development Co., Ltd. and Haizetan coal mine project 5 billion yuan syndicated loan approval approved, and Shaanxi Yihua Mining Development Co., Ltd. to which the company belongs obtained syndicated loans with a total size of no more than 5 billion yuan; 3) Issuance of shares to purchase assets in order to New shares were issued at a price of 1.29 yuan/share to purchase 51.0095% of the company's shares in Tianyue Coal; 4) Announcement on the progress of obtaining mining rights for the subcoal-to-aluminum project, actively promoting geological exploration, reserve filing, and acquisition of mining rights, with an estimated production capacity of 6.9 million tons/year after delivery.

Promote the acquisition of aluminum mining rights under coal and achieve new value in assets: The company's 8 mines, including the Sendayuan coal mine, are the first batch of mines to obtain subcoal bauxite mining rights. The estimated total amount of bauxite resources is 0.116 billion tons. Based on a 60% extraction ratio, the amount that can be extracted is about 69.58 million tons, and the total production capacity is expected to be 6.9 million tons/year. The company is actively promoting geological exploration, reserve filing, and acquisition of mining rights. Based on the current production capacity, the production cost of aluminum under coal is about 300 yuan/ton, and the sales price is about 450 yuan/ton. It is expected to increase the company's total revenue by more than 2.7 billion yuan and net profit by about 0.46 billion yuan each year.

The 5 billion yuan syndicated loan credit for the Haizetan coal mine project was approved, demonstrating credit repair: the Haizetan coal mine mainly consists of high-quality chemical coal and thermal coal, with a resource reserve of 1.145 billion tons. It is expected to produce 3 million tons of coal in 2026; to reach production in 2027, it is expected to produce 10 million tons of coal. After the Haizetan coal mine was put into operation and production capacity was fully released, according to preliminary estimates of the average coal price in the 2023 market, it added about 9 billion yuan in annual revenue and 4.4 billion yuan in net profit. The approval of this credit approval is conducive to speeding up the construction progress of the Haizetan coal mine project and speeding up the commissioning of the Haizetan coal mine; it also reflects the substantial restoration of the company's credit and financing functions, and effectively optimizes the company's financing structure.

Promote the acquisition of high-quality coking coal companies and enhance collaborative development: The company will issue new shares at a price of 1.29 yuan/share, a 17.27% premium over the closing price on July 24, 2024, to purchase 51.0095% of the company's Tianyue Coal Company's shares. The transaction price is tentatively not more than 350 million yuan. After the transaction is completed, the listed companies' high quality coking coal resource reserves can increase by 28.3696 million tons, and the coking coal production capacity can increase by 0.6 million tons/year. Assuming that the transaction is sold at a provisional price (no more than 350 million yuan), the listed company's earnings per share in 2023 are expected to increase from 0.1020 yuan to 0.1038 yuan, an increase of 1.76%; ROE will increase from 5.0124% to 5.1393%, an increase of 0.1269 pct.

Optimistic about the commissioning progress of the project under construction, it is expected to increase in the next three years: based on the company's current production capacity and good expectations for the construction and commissioning of the Haizetan coal mine, the company expects net profit attributable to shareholders of listed companies to be 2.8, 3.8, and 5.8 billion yuan in 2025-2027, respectively, 23.58%, 35.71%, and 52.63%, respectively. The net operating cash flow for 2025-2027 is 7.3, 8.5, and 12.2 billion yuan, respectively. 43.53% The high profit growth rate and cash flow growth rate will greatly improve the company's resilience to risks and cash dividends, and drive the company's investment value upward.

Profit forecasting and valuation

We expect the company to achieve net profit of 2.493/2.876/3.412 billion yuan in 2024-2026, an increase of 10.05%/15.34%/18.63% year over year; EPS is 0.11/0.13/0.15 yuan, corresponding PE is 9.98/8.65/7.29 times, maintaining the “gain” rating.

Risk warning

The macroeconomy stalled and declined; coal prices fell beyond expectations; coal production fell short of expectations; progress in projects related to aluminum under coal fell short of expectations; and asset acquisitions fell short of expectations.