The Zhitong Finance App learned that Haitong Securities released a research report saying that at present, the price of thermal coal and coking coal has entered the bottom fluctuation range, but the trend is still awaiting further boost from the demand side. Affected by high prices in the same period last year and production cuts in the first quarter of this year, the sector's performance in the first quarter is under pressure. There may still be room for shock adjustment in the short term, but with the coal price center remaining high, the dividend investment logic remains unchanged throughout the year.

Recommended focus: 1) Investment opportunities for central enterprises that continue to increase their management efficiency and market value management emphasis: China Shenhua (601088.SH), China Coal Energy (601898.SH), Tiandi Technology (600582.SH), and Power Investment Energy (002128.SZ); 2) Coal prices are expected to rise steadily in May-June, and recommend stable and flexible 24-year performance: Huaibei Mining (), Pingmei Co., Ltd. (DAB), Shaanxi Coal (Chengdu), Yankuang Energy (600188) 600985.SH 601666.SH 601225.SH .SH); 3) The coal machinery companies Tiandi Technology (600582.SH) and Zheng Coal Machine (601717.SH) have benefited from the implementation of coal production capacity reserve policies, the intelligent transformation of coal mine safety, and the “Belt and Road” initiative.

Haitong Securities's main views are as follows:

The total profit of the industry for the full year of 2023 was -25% year-on-year, the profit of tons of coal was 164 yuan/ton, and the total profit of 24Q1 and the profit of tons of coal continued to decline.

The total profit of the industry for the full year of 2023 was +9%/-25% compared to 21/22, and the profit per ton of coal was 164 yuan/ton, compared to 21/22 -9/-63 yuan/ton (-5.1%/-27.8%). In March '24, the industry's profit per ton of coal was 138 yuan/ton, down 26/57 yuan/ton from the end of 23/the same period in '23. In 2023, the 35 sample companies had a total net profit of 187.2 billion yuan (-26% YoY), and the total net profit for 24Q1 was 42.1 billion yuan (-35% YoY).

Of the 26 listed coal companies that disclosed production and sales data, the average price/ton coal cost/ton net profit all declined in 2023, with an average decline of 12.5%/3.7%/22.3%.

By coal type, the average price/ton coal cost in 2023 was -10.4%/-1.1%, with an average net profit of about 130 yuan per ton of coal, or -20.7%; the average price/ton coal cost of coking coal enterprises was -16.6%/-7.6%, and the average net profit per ton of coal was about 162 yuan, or -22.9% year-on-year. In 2023, the operating revenue/cost ratio of the sample listed companies was -10%/-5.6%, and the gross profit margin was 31.7%, -3.2pct year on year; the total net profit to mother (excluding China Shenhua) reached 187.2 billion yuan (127.5 billion yuan), or -25.6% (-29.9%) compared to the same period last year. In 2024Q1, the operating revenue/cost ratio of major listed companies was -12.1%/-7.1%, gross profit margin of 28.9%, -3.9 pct year on year; net profit to mother (excluding China Shenhua) totaled 42.1 billion yuan (26.3 billion yuan), or -34.8% (-39.1%) year over year.

The balance ratio of the industry remained at about 60% in '23, and capital expenditure support continued to increase, and continued to have a high dividend ratio of 40%.

1) Balance and liability structure: The scale of industry debt has continued to rise since 23 years, reaching a record high of 4.6 trillion yuan in February '24, and the overall balance ratio has remained around 60%. 2) Capital expenditure: The total capital expenditure of the 35 sample companies in 2023 was 155.4 billion yuan, an increase of 644.4/29.8 billion yuan over 2021/2022, a record high since 2011, reflecting the increased willingness of enterprises to invest after high profits. 3) Dividends: In 2023, 26 sample companies (excluding a total of 9 coking companies with poor profit stability, out of the 35 sample companies) had a total dividend of 104.7 billion yuan, -25% compared to 22, accounting for 56% of the net ratio to mother, or -1 pct. The average dividend rate of the sample companies in 2023 was 40%, continuing the industry's tradition of high dividends.

Coal price outlook: The coal price center is expected to remain medium to high.

In terms of thermal coal, the average price of 5,500 kcal in Qingang in 2023 was 967 yuan/ton, -23.7% compared with the same period last year. It is expected that the overall balance between thermal coal supply and demand will be maintained in 24, and market coal prices and Changxie coal prices will gradually converge. Considering the sharp increase in hydropower output and the change in the nuclear production capacity policy in the previous few years, it is expected that the 24-year average price will remain above 700 yuan/ton, the average market price will fluctuate around 900 yuan/ton, and the price center of thermal coal remains high. In terms of coking coal, the overall price of coking coal showed a “V” trend in 2023. The price increase of the main coking coal depot in Jingtang Port was an average of 2,285 yuan/ton, -19.7% over the same period last year.

Stricter coal safety supervision is expected to normalize in 24, and production conditions in Shanxi, the main producer of coking coal, are expected to remain tense for 23 years, but in terms of imports, Mongolian coal is expected to remain high, and imports of Russian and Australian coal may increase further. The tight supply and demand pattern is expected to ease slightly compared to 23. Without considering imports due to political factors or uncertainty, the average price of coking coal in 24 is expected to remain the same or slightly lower than this year, but considering the low level of downstream inventories, prices may be upward elastic.

Risk warning: Demand has declined sharply, and the impact of policies to ensure stable supply and price, production restrictions, and imported coal needs to be continuously tracked.