Mr Xu Hui, Secretary to the board, attended the dbAccess Asia Conference in Singapore. Key takeaways are:
Raw coal output c.3.3mt-3.5mt in FY13 – in line with expectation
The company is guiding for 3.3-3.5mt raw coal output in 2013, with an average yield of c.50% (In 2011/12, its raw coal output was 4.3mt/3.3mt), of which 0.4-0.6mt would be from Sichuan and c.0.8mt from Yunnan. Guizhou would be the major contributor and may deliver more than 2mt in 2013. Operations at the Dahegou and Tianbao mines (the company’s two largest mines in Panzhihua, Sichuan) are expected to resume in June 2013 (coal mines in Panzhihua were suspended and are being consolidated due to a severe mine accident in August 2012). We estimate 3.4mt output in 2013, in line with the company guidance.
Focus on cost control; guiding an aggressive target with YoY flat
Hidili's raw coal total cost was RMB186/t in 2012, slightly higher than RMB181/t in 2011. The company believes the raw coal total cost would be relatively flat in 2013 (vs. DBe 5% YoY growth). The clean coal total cost was RMB1,227/t in 2012, c.RMB200/t higher than 2011, due to higher fixed cost (lower volume) and financial costs (higher rate c.11% of Hu aneng trust). The company is trying to cut the clean coal total cost by reducing the overall debt levels and replacing the higher cost debt (Huaneng trust loan).
1Q13 ASP realization better-than-expected; no excitement in the rest of 2013
Clean coal ASP (excl. VAT) was RMB1,111/t in 1Q13, and currently hovers around RMB1,100/t. We forecast a lower clean coal ASP of RMB973/t in 2013 by applying a 7% discount to the domestic benchmark price of Liulin No.4. However, in 1Q13, Hidili's clean coal was trading at a 3% discount to Liulin No.4 ASP, better than expected mainly due to a relatively better coking coal quality in Guizhou than in Sichuan. Thus, we might have to review our ASP assumptions. As for the overall coking coal price, Mr Xu does not think there is much upside or downside, and believes Hidili's clean coal ASP would be c.RMB1,100–1,200/t in 2013.
Large capex plan in 2013 but flexible
According to Mr Xu, the 2013 capex plan is RMB700m (vs. DBe RMB500m), of which RMB100m is for mining rights, RMB50m for the remaining payments of previous acquisitions, and the rest for the construction of Guizhou mines. The capex is relatively flexible, which the company would adjust based on the cash flow in 2013. He also said Hidili will not have much maintenance capex as its mines in Guizhou and Yunan are newly built and relatively small.
Hidili's shares have been suspended since 20 May pending a substantial disposal of the company. Hidili would hold a reverse roadshow thereafter.
Mr Xu Hui, Secretary to the board, attended the dbAccess Asia Conference in Singapore. Key takeaways are:
Raw coal output c.3.3mt-3.5mt in FY13 – in line with expectation
The company is guiding for 3.3-3.5mt raw coal output in 2013, with an average yield of c.50% (In 2011/12, its raw coal output was 4.3mt/3.3mt), of which 0.4-0.6mt would be from Sichuan and c.0.8mt from Yunnan. Guizhou would be the major contributor and may deliver more than 2mt in 2013. Operations at the Dahegou and Tianbao mines (the company’s two largest mines in Panzhihua, Sichuan) are expected to resume in June 2013 (coal mines in Panzhihua were suspended and are being consolidated due to a severe mine accident in August 2012). We estimate 3.4mt output in 2013, in line with the company guidance.
Focus on cost control; guiding an aggressive target with YoY flat
Hidili's raw coal total cost was RMB186/t in 2012, slightly higher than RMB181/t in 2011. The company believes the raw coal total cost would be relatively flat in 2013 (vs. DBe 5% YoY growth). The clean coal total cost was RMB1,227/t in 2012, c.RMB200/t higher than 2011, due to higher fixed cost (lower volume) and financial costs (higher rate c.11% of Hu aneng trust). The company is trying to cut the clean coal total cost by reducing the overall debt levels and replacing the higher cost debt (Huaneng trust loan).
1Q13 ASP realization better-than-expected; no excitement in the rest of 2013
Clean coal ASP (excl. VAT) was RMB1,111/t in 1Q13, and currently hovers around RMB1,100/t. We forecast a lower clean coal ASP of RMB973/t in 2013 by applying a 7% discount to the domestic benchmark price of Liulin No.4. However, in 1Q13, Hidili's clean coal was trading at a 3% discount to Liulin No.4 ASP, better than expected mainly due to a relatively better coking coal quality in Guizhou than in Sichuan. Thus, we might have to review our ASP assumptions. As for the overall coking coal price, Mr Xu does not think there is much upside or downside, and believes Hidili's clean coal ASP would be c.RMB1,100–1,200/t in 2013.
Large capex plan in 2013 but flexible
According to Mr Xu, the 2013 capex plan is RMB700m (vs. DBe RMB500m), of which RMB100m is for mining rights, RMB50m for the remaining payments of previous acquisitions, and the rest for the construction of Guizhou mines. The capex is relatively flexible, which the company would adjust based on the cash flow in 2013. He also said Hidili will not have much maintenance capex as its mines in Guizhou and Yunan are newly built and relatively small.
Hidili's shares have been suspended since 20 May pending a substantial disposal of the company. Hidili would hold a reverse roadshow thereafter.
