The Q1 performance declined 31% year over year, and overall performance was in line with expectations. The company released its report for the first quarter of 2024. Q1 achieved operating income of 45.39 billion yuan, -23.3% year on month, +23.5% month on month; net profit to mother of 4.97 billion yuan, -30.6% year on month, +74.6% month on month; deducted non-net profit of 4.89 billion yuan, -31.4% year on year, +75.0% month on month, close to last year's Q3 performance level.
Q1 The volume and price of commercial coal fell, and the cost rose slightly year on year, which was a significant decrease compared to the second half of last year.
Q1 Commercial coal production was 32.73 million tons, -2% YoY, -1% month-on-month; self-produced coal sales volume was 32.31 million tons, -1% YoY and -6% month-on-month. Revenue per ton of self-produced coal was 598 yuan, -11% year on month; ton cost was 291 yuan, +7% year on month, -15% month on month (last year Q1-Q4 costs were 273/298/313/343 yuan/ton, respectively); gross profit per ton was 307 yuan, -23% year on year and +20% month on month.
Q1 The price drop of raw materials was relatively large, and the gross margin of the coal chemical business improved year-on-year and month-on-month.
Q1 The company's coal chemical business achieved revenue of 4.74 billion yuan, -14.6% year over month, -2.1% month on month; cost 3.95 billion yuan, -16.1% year on month, -14.1% month on month; gross profit of 800 million yuan, -6.7% year on month, +219.7% month on month; gross margin was 16.8%, +1.4pct year on year, +11.6pct month on month.
Profit forecast and investment suggestions: Medium- to long-term company growth mainly comes from remaining existing mines under construction, the nuclear increase in production capacity of high-quality large mines, and some coal chemical projects. The company is constructing the Weizigou coal mine (2.4 million tons) and the Libi coal mine (4 million tons) and is expected to be put into operation in 2025. Furthermore, the sea is rich in coal reserves and has the capacity to further increase nuclear power and expand production. Looking at resource reserves, China Coal Group is rich in unlisted resources, and the company's endogenous and epitaxial growth can be expected. According to Chinese corporate accounting standards, the company's 24-26 EPS is expected to be 1.43, 1.49, and 1.54 yuan/share, respectively. Considering the systematic increase in sector valuation and referring to comparable company valuations, the company was given 9 times PE in 24 years, corresponding to a reasonable value of 12.9 yuan per share for A shares. According to the company's latest premium rate for AH shares, the reasonable value of H shares was 8.6 HKD/share, maintaining the company's A and H share “buy” ratings.
Risk warning. Prices of coal and chemical products fell beyond expectations, the company's costs and expenses fell short of expectations, and some mines faced resource continuity problems.