Company profile: scarce comprehensive coal enterprises, business involving the whole coal industry chain. The company's commercial activities cover the entire coal industry chain, from coal production and washing, through coal loading and transportation, until coal trade. The main profit of the company comes from Dafanpu Coal Mine. Xiaojiazhuang loading Station transports the self-produced coal and purchased coal to Qinhuangdao Port through Dazhuang Railway. The Group's coal trading center located in Qinhuangdao helps the company to achieve diversified sales. In 2019, the company achieved operating income of 2.74 billion yuan (+ 12%) and equity net profit of 833 million yuan (+ 3%).
The company has excellent coal resources and has been awarded the first-class green safety mine. Dafanpu Coal Mine is located in Zhungeer Banner, Ordos, with an approved production capacity of 5.1 million tons per year and a total reserve of 161 million tons. It is a kind of low gas mine. The sulfur content, ash content and water content of raw coal are significantly better than the industry average. "Power 2", a self-produced power coal product, is a brand coal in the northern port. For five consecutive years, the company has been awarded as "Class A Coal Mine" in Zhungeer Banner, Inner Mongolia, and has been selected into the list of national green and safe mines. The company's coal mine adopts the new full-height mining technology of top coal caving, with advanced mining technology, and has 778 employees at the end of 2019, maintaining a low level of staff costs in the industry.
The transportation is accurate and convenient, and the geographical position is superior. The entire mining area of Dafanpu Coal Mine is completely covered by transport belts and connected to the main facilities, and the convenient transport equipment greatly reduces consumption and improves cost-effectiveness. The coal is sent to the ground from the shaft by transport, into the coal preparation plant for processing, and finally to the Xiao family loading station to be transported to the market by railway. Superior transportation conditions improve production efficiency, reduce manpower and transportation costs, and improve the overall operating efficiency of the company.
The profitability is superior, and the mining cost is comparable to China Shenhua Energy. In 2019, the average selling price of the company's commercial coal was 440 yuan / ton, the unit cost was 271 yuan / ton, the gross profit per ton coal was 169 yuan / ton, the gross profit margin was 39%, and the net profit margin was 30.5%. Through the data in recent years, we can see that the production cost is relatively stable, the transportation cost per ton of the company is about 160yuan / ton, and other production costs are about 100yuan / ton. Shenhua self-produced coal production cost is stable at 110yuan / ton (excluding transportation costs), it can be seen that the company's mining cost is comparable to that of China Shenhua Energy, the industry leader.
The price center of thermal coal has increased in 2021. On the supply side, we judge that domestic coal mine output is expanding moderately, and imports are expected to be stable as a whole. On the demand side, we judge that the consumption growth rate of the thermal power industry is expected to improve, and the consumption of the iron and steel building materials industry is expected to increase slightly. Looking forward to 2021, the supply and demand pattern of the coal industry is expected to be in tight balance, and the price center of thermal coal is expected to rise. The market-oriented sales of power energy will enjoy more the performance flexibility brought about by the rise in coal prices.
Earnings Forecast and valuation: we expect the company to achieve operating income of 29.9, 34.8 and 37. 5% in 2020-2022.
500 million yuan, + 9%, + 17% and + 8% respectively over the same period last year. The net profit attributable to the shareholders of the parent company was 9.3 billion yuan, 1.22 billion yuan, + 12%, + 30% and + 9%, respectively, and the EPS was 0.11 yuan 0.14 yuan per share. The current stock price (closing price on January 19, 2021 is HKD0.42, equivalent to RMB 0.35) corresponds to PE of 3.2 times 2.42.2 times. Coverage for the first time, giving the company an "overweight" rating.
Risk hints: single mine operation risk; risk of price fluctuation of coal products; risk of sustainable substitution of renewable energy; risk of impact of coal import; risk of information lag or untimely updating of public data used in the research report.
