Description of the event
The company released its 2024 semi-annual report: from January to June 2024, the company achieved total operating income of 17.249 billion yuan, -50.84%; net profit to mother of 1.455 billion yuan, -64.70% year on year; net profit after deduction of 1.492 billion yuan, -63.61% year on year; basic earnings per share of 0.2216 per share, -64.70% year on year; weighted average return on net assets of 4.90%, a year-on-year decrease of 8.38 percentage points. The net cash flow from the company's operating activities in the first half of the year was 2.625 billion yuan, or -42.70% compared with the same period last year. As of June 30, the company's total assets were $55.225 billion, -5.70% YoY; net assets were 25.917 billion yuan, -10.52% YoY.
Incident reviews
H1 Coal production and sales declined, and gross margin declined. From January to June 2024, the company's raw coal production (excluding self-use coal) was 9.7667 million tons, -17.8% YoY (of which Q1:589.17, -12.96% YoY; Q2:
387.5, -24.1% YoY, -34.2% month-on-month); H1 raw coal sales volume was 13.381 million tons, -3.11% (including Q1:780.3, -1.09% YoY; Q2:557.8, -5.8% YoY, -28.5% month-on-month); the decline in production and sales was mainly affected by security pressure in the first half of the year and temporary geological changes in Baishi Lake, and Q2 was greatly affected. In terms of price, the company's main target markets include a decline in coal prices in Gansu, Ningxia and other regions. The average price of the Jingyuan Electric Coal Q5000 car plate price H1 was 733 yuan/ton, -13.52%; the average price of the Ningxia Shizuishan Thermal Coal Q5000 car plate price H1 was 672 yuan/ton, -13.38% year over year; the price of coal sold in Hami also decreased. The average price of the Hami Thermal Coal Q6000 H1 was 380 yuan/ton, -19.97% YoY. Due to the company's low coal mining costs, the gross margin of the H1 coal business is about 26.22%, a decrease of 8.46pct compared to the average gross profit margin of 34.68% in 2023, but it is still at a historically high level.
LNG trade spreads have narrowed, and the scale of the company's trade has been reduced. Guanghui New Energy's self-produced gas H1 achieved 0.366 billion square meters, +18.51% year-on-year, and almost full production. In terms of outsourced gas, H1 achieved sales volume of 1.746 billion units, or -54.14% year-on-year. In the first half of the year, the difference in foreign gas purchase trade decreased. The average price of LNG CIF and domestic ex-factory price was -652 yuan/ton. Trade profit margins were poor, and Guanghui International Natural Gas Trading Co., Ltd. achieved net profit of -0.033 billion yuan.
Coal chemical trade has shrunk, and gross margin has increased. The company's main coal chemical products are methanol, ethylene glycol, coal-based oil products and coal chemical by-products; methanol production in January-June was 0.5783 million tons, +22.16% year over year; production of other products decreased: 0.0469 million tons (-5.14%) of ethylene glycol, 0.2935 million tons (-11.85%) of coal-based oil products; 0.2154 million tons (-4.19%) of by-products. The company avoided price risks and actively reduced the scale of trade in the first half of the year. Combined with a recovery in the price of coal chemical products in Q2, the average prices of methanol and ethylene glycol H1 in East China rose by +5.89% and 10.39%, respectively. The gross profit margin of H1's coal chemical business was 27.06%, which is 3.41pct higher than the average gross profit margin of 23.65% in 2023.
With the Baishi Lake nuclear increase and the Malang Coal Mine's production capacity approval of 10 million tons/year, the company can be expected to grow in the future. According to the company's announcement on June 24, the Baishi Lake Open Pit Mine increased production capacity by 17 million tons/year (from 18 million tons/year to 35 million tons/year); on June 4, the additional production capacity of the Malang coal mine from 5 million tons/year to 10 million tons/year was approved. The total additional production capacity of the company in the second half of the year exceeded 22 million tons. Under current gross profit, the additional coal production will effectively expand the company's profit scale.
Investment advice
The company's 2024-2026 EPS is expected to be 0.7\ 0.98\ 1.16, respectively, corresponding to the company's closing price of 6.04 yuan on September 4, and the 2024-2026 dynamic PE is 8.7\ 6.2\ 5.2 times, respectively. Considering the sharp increase in coal production capacity and the recovery of natural gas trade spreads, we expect the company's net profit scale to increase in the second half of the year and the latter, and continue to give it an “increase holdings -A” investment rating.
Risk warning
Risk of macroeconomic growth falling short of expectations; risk of falling coal and LNG prices exceeding expectations; risk of production safety; risk of approval of infrastructure project procedures, etc.