Introduction to this report:
Coal sales have continued to grow, and the price stability is stronger; power generation and electricity sales have maintained good growth; the transportation and coal chemical sectors have maintained steady growth; maintained high dividends and continued to lead the industry.
Key points of investment:
Maintain an “Overweight” rating. The company achieved revenue of 87.647 billion yuan (+0.7%) and net profit to mother of 15.884 billion yuan (-14.66%) in the first quarter of 2024, in line with market expectations. We maintain the 2024-2026 EPS forecast of 3.08, 3.09, and 3.19 yuan. Considering China Shenhua's profit stability and the leading role of dividend assets, the target price was raised to 46.20 yuan (+3.08 yuan) for 15x PE higher than the industry.
Coal sales have continued to grow, and price stability is stronger in terms of high and long-term ratio. The company produced 81.3 million tons of commercial coal (+1.5%) and sold 117 million tons (+8.8%) in the first quarter of 2024. Against the backdrop of a decline in national coal production in the first quarter, the company's market share bucked the trend. The total share of the company's annual Changxiehe monthly Changxie reached 81.3%. The average sales price was 573 yuan/ton (-48 yuan/ton), and the company's high Changxie ratio is more stable in terms of price. It is expected that in mid-late May, with the early replenishment of stocks during the peak demand season for electricity and coal, prices will officially enter an upward channel, and the year-on-year pressure on the company's coal sector will continue to narrow in the second quarter.
Electricity generation and electricity sales have maintained a good growth rate. In the first quarter, the company achieved a total power generation of 55.2 billion kilowatt-hours (+7.1%) and sold a total electricity volume of 51.89 billion kilowatt-hours (+7.1%). Judging that the high increase in power generation and electricity sales was driven by new installed capacity and was positively affected by overall demand for thermal power in the first quarter. The average usage time of a coal-fired generator is 1,237 hours (-46 hours), and the average selling price of electricity is 409 yuan/megawatt-hour (-2.4%).
Leading high dividends and high dividend dividends. In 2020-2023, the company's dividend rates were 91.8%, 100%, 72.7%, and 75%, respectively. It continued to maintain high dividends and lead the industry. The company's own profit stability has greatly surpassed the industry. Under changes in the supply and demand pattern, the predictability, clarity and stability of future profits will increase. Considering the long-term low interest rate environment in the future and the current asset shortage background, the investment value of high-dividend and high-dividend dividend assets will continue to rise, and we continue to be optimistic about China's Shenhua's valuation reshaping.
Risk warning: The macroeconomy fell short of expectations; coal prices fell more than expected.