Incident: According to information from Coke Lian, the 15th round of price increases for coke came to fruition, with a cumulative increase of 1,000 yuan/ton.
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The continued rise in coke prices favors the release of the company's performance. According to Wind data, since the end of July 2020, the price of secondary metallurgical coke in Taiyuan has continued to rise continuously. As of January 29, 2021, it had risen from 1800 yuan/ton to 2,750 yuan/ton, an increase of 950 yuan/ton, or 52.78%. Among them, the fourth quarter of 2020 rose 450 yuan/ton in a single quarter, an increase of 22.5%, and the average price for the fourth quarter rose 310 yuan/ton over the third quarter. The average price for January 2021 (as of January 20) was 441 yuan/ton higher than the fourth quarter of last year. The continued rise in coke prices is expected to better drive the release of the company's performance.
The advantages of large-scale coke production capacity are obvious. According to the announcement, Huasheng Chemical has now loaded coal and put into operation. The company's coke production capacity has reached 7.15 million tons/year, with an equity production capacity of 6.48 million tons/year. It is the coke company with the largest A-share production capacity. According to Meijin Energy's official website, the company's 5 million tons/year coking and coke oven gas comprehensive utilization project in Inner Mongolia has already started. The coking portion is expected to be put into operation in 2022.
With the expansion of coal production capacity, the cost advantage is obvious. The company has 3 pairs of coal mines with an approved production capacity of 5.4 million tons/year and an equity production capacity of 4.12 million tons/year. Furthermore, the company plans to acquire 100% of the shares of Jinhui Coal Co., Ltd. After the acquisition is completed, the company's coal production capacity will expand by 900,000 tons/year to 6.3 million tons/year, and equity production capacity will increase to 5.02 million tons/year. The expansion of the company's coal production capacity will be more conducive to locking in raw material costs.
The beginning of a long-term profit cycle for coke is expected to drive the release of the company's performance. The plight of low concentration and large excess capacity in the coke industry was gradually solved with the help of the industry's removal of production capacity. Currently, the industry's capacity utilization rate has risen to a high level, and capacity removal continues. In the context of high actual capacity utilization, the price increase brought about by the contraction in coke supply is more elastic, and it is expected that the price of coke will rise. With the continuous implementation of capacity removal in the coke industry, the pattern of supply and demand in the industry will change from previous excess to net shortage. It is expected that after 2021, the concentration of the industry will increase, and the two major problems plaguing the industry are expected to be fully solved, the industry's boom will recover, and it is expected that continuous profits will be achieved.
The hydrogen business is progressing rapidly. The company has deployed the entire fuel cell industry chain from hydrogen gas sources - hydrogen refueling stations - membrane electrodes (Hongji Chuangneng) - electric reactors (Guohong Hydrogen Energy) to complete vehicles (Flying Spur). At the end of last year, the company's hydrogen energy industrial park has covered several major economic development regions and received support from local governments, including cities such as Qingdao (Bohai Bay Area), Jiaxing (Yangtze River Delta region), Foshan, Guangzhou, Yunfu (Guangdong-Hong Kong-Macao Greater Bay Area and surrounding area) and Jinzhong City in inland Shanxi Province. According to reports from Shanxi Capital Circle, on January 28, Qingdao Meijin New Energy Vehicle Manufacturing Co., Ltd., a subsidiary of Meijin Energy, officially delivered the first batch of 50 hydrogen-fueled city buses to Qingdao Zhenqing Bus Group. The Qingdao West Coast New Area took the lead in starting a hydrogen bus demonstration operation model. This is also the country's first 5G hydrogen fuel vehicle demonstration line. Furthermore, the first fixed hydrogen refueling station in Qingdao operated by Qingdao Meijin has been put into operation with a hydrogenation capacity of 1000 kg/day.
Investment advice: Net profit for 2020-2022 is expected to be 1,074/32.90/3.133 billion yuan respectively.
Considering the future improvement in the supply and demand pattern of the coke industry and the continuous development of the fuel cell vehicle industry, the company's performance and cash flow are expected to continue to improve steadily. The buy-A investment rating was given, and the target price for 6 months was 9.24 yuan.
Risk warning: The majority shareholders' pledge ratio is high, demand for coke falls short of expectations due to the macroeconomic downturn, and hydrogen energy project construction falls short of expectations
