Pingmei Co., Ltd. released its report for the first quarter of 2024 on April 25, 2024:
In the first quarter of 2024, the company achieved revenue of 8.244 billion yuan, a year-on-year decrease of 4.47% and a year-on-month decrease of 2.
61%; net profit to mother was 740 million yuan, down 35.40% year on year and 14.41% month on month; net profit without return to mother was 755 million yuan, down 26.12% year on year and 20.45% month on month; net cash flow from operating activities was 2,827 billion yuan, down 22.87% year on year, up 456.58% month on month; earnings per share was 0.30 yuan/share, down 40.00% year on year and 18.92% month on month.
Coal business: The impact of safety incidents has subsided, and Q2 volume price increases and steady profit improvements can be expected.
In terms of production and sales volume, production and sales both declined in Q1 due to safety incidents. 2024Q1 achieved raw coal production of 6.63 million tons (-15.04% YoY, -13.88% YoY) and sales volume of 6.91 million tons (-12.86% YoY, -12.75% month-on-month), of which 6.95 million tons (-16.90% YoY, -15.27% YoY) were sold. On January 12, 2024, a gas overflow accident occurred at the 12th mine of Pingmei Co., Ltd. (1.04 million tons/year). As a result, 13 of the company's subsidiaries immediately stopped work and production on high-gas mines and coal and gas protruding mines. Until February 2, all other coal mines other than the 12 mines resumed work and resumed production. As a result, Pingmei Co., Ltd.'s Q1 coal production and sales declined.
In terms of price and cost, Q1 prices rose month-on-month, and profitability increased year-on-year. The price of 2024Q1 commercial coal is 1,156 yuan/ton (+9.49% YoY, +16.41%); the average cost of commercial coal is 834 yuan/ton (+11.25% YoY, +24.37%); the average gross profit of commercial coal is 322 yuan/ton (+5.18% YoY, -0.15% month-on-month). As of April 26, 2024, the aggregate price of low-sulphur coking coal in Pingdingshan, Henan was 2,120 yuan/ton, down 8.62% from quarter to quarter, 15.20% year on year, and coal prices weakened somewhat.
Looking ahead to the second quarter, the production and sales volume of Pingmei Co., Ltd. is expected to achieve restorative growth as the impact of the safety incident subsides. Meanwhile, downstream demand continued to recover, profits from coking companies and steel mills improved, steel mills gradually resumed production, and daily iron and water production continued to improve. Demand for coking coal is expected to maintain a growing trend in the second quarter. It is expected that the price of coking coal will remain high in Q2. As of April 26, 2023, the average daily iron and water production of 247 steel companies reached 2.2872 million tons, a month-on-month increase of 3.
35%, up 2.43% from quarter to quarter, down 6.09% year over year.
Profit forecast, valuation and investment rating: The company's revenue for 2024-2026 is expected to be $333.25, 344.43, and 35.409 billion yuan, respectively, and realized net profit of $44.62, 47.85 billion yuan, and 5.135 billion yuan, respectively. Earnings per share are 1.90, 2.04, and 2.19 yuan respectively. The current stock price is $12.89, and the corresponding PE is 6.4X/6.0X/5.6X, maintaining a “buy” rating.
Risk warning: There is a risk that coal prices will fall more than expected, production safety risks, macroeconomic downturn risks, and public data used in research reports may be delayed or not updated in a timely manner.