Event: on April 21, 2021, the company released its 2020 annual report that the company's annual operating income was 7.101 billion yuan, an increase of 6.91% over the same period last year. The net profit belonging to shareholders of listed companies was 1.097 billion yuan, an increase of 131.40% over the same period last year.

Comment

The performance increased greatly in 2020, and the investment income in 2021 is expected to further increase: the company's return to the mother net profit is 1.097 billion yuan, an increase of 131.4% over the same period last year, and the investment income is 1.581 billion yuan, an increase of 15.69% over the same period last year, mainly contributed by China Coal Huajin. We believe that the price center of thermal coal and coking coal is expected to move up in 2021, the performance elasticity of China Coal Huajin is expected to be released, and the investment income is expected to further increase.

Coke production and sales have greatly increased and profits have increased: Coke production in 2020 was 3.3354 million tons, an increase of 14.03 percent over the same period last year, and sales volume was 3.3483 million tons, an increase of 13.94 percent over the same period last year. The average sales price of coke for the whole year was 1704.22 yuan / ton, down 25.66 yuan / ton from the same period last year, or 1.48%. In terms of chemicals, the company sold 228700 tons of methanol, 77400 tons of carbon black, 71500 tons of asphalt, 77400 tons of pure benzene, and 30500 tons of industrial naphthalene, with a comprehensive sales increase of 78600 tons, an increase of 19.08 percent, and a decrease of 544.06 yuan, or 19.29 percent. Taken together, the total gross profit margin of the coking business is 5.6%, an increase of 8.03 percentage points over the same period last year. According to the announcement, it is planned to produce 3.3 million tons of coke (wet base) for the whole year of 2021, which is basically stable.

The proposed cash dividend is 35.92%, with an increase of 3 shares for every 10 shares: according to the announcement, the company plans to distribute a cash dividend of 2 yuan (including tax) for every 10 shares, a cash dividend payment rate of 35.92%, and an estimated dividend yield of 3.15%. In addition, the company uses capital reserve to increase 3 shares for every 10 shares of all shareholders.

The improvement of the coke industry is expected to bring greater performance flexibility for the company. The plight of low concentration and substantial overcapacity in the coke industry has been gradually solved with the help of industry capacity removal. At present, the capacity utilization rate of the industry has been raised to a higher level, while capacity removal is still going on. Under the background of high utilization rate of actual production capacity, the price increase caused by coke supply contraction is more flexible, and coke price is expected to rise. With the continuous implementation of the capacity removal of the coke industry, the supply and demand pattern of the industry will change from the previous surplus to the net shortage. It is expected that after 2021, the industrial concentration will increase, the two major problems troubling the industry will be fully solved, and the industry will recover. It is expected to achieve sustainable profits. In the short term, according to the Bureau of Statistics, the growth rate of coke production in March was 4.7% lower than the 8.9% growth rate of downstream pig iron, that is, the growth rate of downstream demand was higher than that of supply, and the tight supply pattern remained unchanged. Therefore, on the whole, the coke supply side has been tightened under the influence of environmental protection inspection and shutting down the backward production capacity, and the raw material end price has gone up, which has formed a strong support to the coke price, and the coke price will show a stable and medium-strong trend in the short term.

Investment advice: buy-An investment rating, 6-month target price of 8.75 yuan. We estimate that the return net profit of the company from 2021 to 2023 is 2.815 billion yuan, corresponding to 1.25, 1.31, and 1.43 yuan per share, respectively.

Risk tips: Coke prices fell sharply, chemical products prices fell sharply.