(Report Producer/ Analyst : Guangfa Securities Anpeng Song Wei)
1. Company Profile: The leader in thermal coal , with outstanding resource endowment advantages
(1) Basic situation: A high-quality thermal coal enterprise with an annual output of over 100 million tons, with obvious advantages in resource production capacity
Co., Ltd. is a Co., Ltd. established by Shaanxi Coal and Chemical Industry Group Co., Ltd. with investment in its main coal business assets.
company was listed on the IPO in January 2014. In December 2015 and April 2016, the company successively divested 14 loss-making coal mines including Baishui Coal Mine, Xujiagou Coal Mine, Jinhuashan and Dongpo.
Since 2018, the company’s Xiaobaodang No. 1 Mine, Yuan Dadan Coal Mine, and Xiaobaodang No. 2 Coal Mine in the northern Shaanxi mining area have been completed and put into operation.
In October 2022, the company spent 34.8 billion yuan to acquire the related assets of Binchang Mining Group and Shennan Mining, a subsidiary of the group. Main business of
: The main business of company includes coal mining, washing, processing, sales and production services. The main product is coal, which has the characteristics of low ash, low sulfur, low phosphorus and high calorific value. It is a high-quality coal for power, chemical industry and metallurgy. Coal resources mainly come from three main mining areas: Weibei Mining Area, Binhuang Mining Area, and Shaanbei Mining Area, of which the Shaanbei Mining Area has the largest recoverable reserves.
Resource advantages: As of mid-2022, the company's current coal reserves are 214.9 billion tons, recoverable reserves are 8.6 billion tons, and the recoverable life is more than 70 years. It owns Hongliulin, Zhangjiamao, Caragana Tower, Xiaobaodang No. 1 and No. 2 five pairs of 10-million-ton mines, with obvious production capacity advantages. Intelligent production capacity accounts for 97% of the total production capacity, and 100% of the production auxiliary systems realize intelligent centralized control.
(2) Controlling shareholder: Shaanxi Coal Group The "14th Five-Year Plan" development goals are clear, and listed companies are expected to benefit
The company's major shareholder is Shaanxi Coal Group, which currently holds 65.12% of the company's equity . Shaanxi Coal Group is the only large state-owned coal enterprise group in Shaanxi Province. It is 100% controlled by the Shaanxi Provincial State-owned Assets Supervision and Administration Commission. It ranks second among the enterprises supervised by the Shaanxi Provincial State-owned Assets Supervision and Administration Commission. It enjoys the support and convenience of the regional policy in terms of resource acquisition, industrial integration, project approval, and credit support.
1. Main business: The diversified development industrial pattern is gradually optimized, with the coal sector’s profit contribution accounting for 72%
Since the establishment of Shaanxi Coal Group in 2004, after 18 years of reform and development, through investment and new construction, acquisitions and mergers, asset transfers, internal reorganization and other means, it has formed an industrial pattern of "coal mining, coal chemical industry, coal-fired power generation, steel smelting, machinery manufacturing, construction, railway investment, technology, finance, modern services" and other related diversified complementary and coordinated development industries.
According to the group’s bond issuance instructions , as of the first half of 2022, the group’s coal products, chemical products, steel products, construction business, machinery products and other businesses (mainly non-coal trading business) The operating income was 873.4, 546.0, 376.1, 67.7, 2.23 and 40.62 billion yuan respectively, accounting for 38.1%, 23.8%, 16.4%, 3.0%, 1.0% and 17.7% respectively. From the perspective of gross profit, the above-mentioned main businesses achieved profits of 334.9, 72.6, 16.4, 17.8, 4.0 and 2.08 billion yuan respectively. Currently, the coal sector still contributes the main profit, accounting for 72%.
Judging from the overall financial data, the group's profitability has increased year by year since 2016, especially in the past two years. The group's total profit and net profit reached 39.3 and 27.2 billion yuan respectively (+125% and +113% year-on-year) in 2021, and further increased to 40.2 and 31.4 billion yuan in the first three quarters of 2022 (+151% and +149% year-on-year, respectively).
At the same time, the group's debt burden has also been significantly reduced. As of the end of the third quarter, the group's overall asset-liability ratio was 66.9%, a decrease of 13.5% from the previous high of 80.4%.
2. Coal sector: Production and sales have grown steadily, and the proportion of external coal output of listed companies is still as high as 30%
According to the group's bond issuance instructions, as of the end of June 2022, Shaanxi Coal Group has coal resource reserves of 30.045 billion tons, recoverable reserves of 20.309 billion tons, and the remaining recoverable life of the mine is approximately 100.96 years, with obvious resource advantages.In addition, the Shaanxi Provincial Government has clearly designated Shaanxi Coal Group as the sole development entity in the Shenfu South District of the Ordos Basin.
According to exploration, Shenfu South District has coal resource reserves of 30 to 40 billion tons. In the future, as the Group further explores and exploits Shenfu South District, the company's resource reserve advantages will be further consolidated.
According to the group's bond issuance prospectus and rating report, in 2021, 6 pairs of mines under the Shaanxi Coal Group will increase production capacity by 10 million tons/year; from January to June 2022, 4 pairs of mines under the group will increase production capacity by 6.6 million tons/year.
As of the end of June 2022, the group's coal production capacity is 201.15 million tons per year. From 2019 to 2021, the raw coal output of Shaanxi Coal Group was 178, 195 and 210 million tons respectively, and the output of listed companies accounted for about 70%.
Shaanxi Coal Group has clear mid- and long-term development goals, and strives to achieve the "16555" high-quality development strategic goal by the end of the "14th Five-Year Plan", that is: striving to achieve 50 billion yuan in profits by the end of the "14th Five-Year Plan" with 100,000 industrial workers, 600 billion yuan total assets , and 500 billion yuan A share market value, and strive to create a world-class enterprise with global competitiveness.
As of the end of 2021, the total assets of Shaanxi Coal Group were 661.6 billion yuan, sales revenue was 395.4 billion yuan, and total profits were 39.3 billion yuan. Among them, the revenue and profit are still more than 20% away from the target value of the "14th Five-Year Plan". At the end of 2021, the total assets, revenue and profit data of Shaanxi Coal listed companies were 185.4 billion yuan, 152.3 billion yuan and 40.7 billion yuan respectively. It is expected to become the main force for Shaanxi Coal Group to achieve its strategic goals in the future.
(3) Financial data: Both net profit and cash flow have increased significantly, and profitability is higher than peers
In terms of financial data, fully benefiting from resource advantages, the company's current profitability is higher than peers. In the first three quarters of 2022, the company achieved a net profit of 28.31 billion yuan (+98.5% year-on-year), deducting non-net profit of 22.53 billion yuan (+54.6% year-on-year), of which non-net profit deducted in Q3 was 7.51 billion yuan in a single quarter. The company's full-year ROE in 2021 was 27.2%. In the first three quarters of 2022, its ROE and post-deductible ROE reached 29.7% and 22.2% respectively, ranking among the top in the industry.
The company has abundant cash flow and excellent operating cash flow performance.
The company is flush with cash, with book monetary funds of 77.1 billion yuan and undistributed profits of 74.8 billion yuan at the end of Q3 2022. Net operating cash flow in 2021 was 51.1 billion yuan, +142% year-on-year; Q1-3 in 22 continued to increase by 21% to 38.5 billion yuan (the company's market value was 185.9 billion yuan). The company's debt ratio is low and interest-bearing liabilities remain at a low level.
company's asset-liability ratio at the end of 2021 was 38.2%, a decrease of 18% from 2015. At the end of Q3 in 2022, it further dropped to 34.6%, of which the interest-bearing debt ratio was 3.3%.
2. Industry outlook: 2022 will continue to exceed expectations, medium and long-term supply and demand will continue or be tightly balanced
(1) Short term: supply growth will fall, and demand is expected to improve to support coal prices
html Thermal coal prices have continued to exceed expectations since 2022, with the average price of 5,500 kcal thermal coal at the port reaching 1,269 yuan/ton, an increase of more than 20% from the 21-year average price. The price increase of mainstream coal types in Shaanxi Province, where the main coal mines of Shaanxi Coal Industry are located, is also in the 20-30% range. Although coal prices have fallen from high levels since the fourth quarter due to weak industrial demand, they have still shown strong resilience.In the short term, the spot price is expected to still be supported. Mainly due to:
(1) Supply is difficult to increase: 1-November domestic coal production has reached a year-on-year growth rate of 9.7%. From December 1-15, national coal production was 190 million tons, with an average daily output of 12.51 million tons. After 21 years of ensuring supply, domestic coal production has increased significantly, and it has become more difficult to continue high growth in the future.
In the short term, safety production requirements are increasing near the end of the year. After some coal mines have completed their annual production tasks, production reductions and maintenance have increased. In addition, due to the increase in epidemic infection cases in various local coal mines, production has also been affected to varying degrees;
(2) Demand may have a marginal improvement: Since the beginning of winter, the daily consumption performance of power plants has been average. Non-power downstream has been affected by peak off-peak production, the epidemic, etc., the operating rate is low, demand performance is also weak, and the market wait-and-see sentiment is strong.Under the stimulus of subsequent policies, demand for infrastructure and real estate chains may improve, and demand is expected to further increase.
(2) Medium and long term: Overall supply and demand continue to be tightly balanced, and coal prices are expected to remain high
In the long term, the growth in coal demand comes from: manufacturing and consumer industries.
Manufacturing industry: The Twenty Major Report points out that it will support the development of specialized and new enterprises and promote the high-end, intelligent and green development of the manufacturing industry. The "14th Five-Year Plan for Intelligent Manufacturing Development" proposes the development path and goals of the manufacturing industry.
consumer industry: consumption Although the overall growth rate of consumption has declined in the past two years, it is still an important factor in driving economic growth in the medium and long term.
The proportion of electricity consumption in sub-sectors:
Non-high-energy-consuming manufacturing industry: The proportion of electricity consumption has continued to increase to 23.0% in the past ten years (a ten-year increase of 3.3PCT), of which the high-tech and loading industry's electricity consumption has reached 10.7%. Tertiary industry and urban and rural residents' domestic electricity consumption: in the past ten years, it has increased from 23.3% to 33.5%. The development of the service industry and the increase in residential electricity consumption have significantly boosted electricity consumption and thus coal demand.
Affected by factors such as the stability of energy-intensive industries, steady growth in consumption, and rapid development of the manufacturing industry, the elasticity coefficient of energy and electricity consumption has increased significantly in the past five years.
predicts that the steady growth of the manufacturing and consumer industries will continue to increase demand for thermal power and coal in the future. The mid- to long-term demand growth rate is expected to maintain 1-3%, and thermal coal prices are expected to remain high.
2022: predicts that coal production will grow by about 7.7% in 2022 to 4.45 billion tons, mainly affected by guaranteed supply and increased production, with the demand side growing by about 1.8%. In 2022, the apparent supply and demand was obviously loose, but in reality, the overall supply and demand was tight.
2023: The growth of production will mainly come from Shanxi, Inner Mongolia, Xinjiang and other regions. On the demand side, growth mainly comes from the growth in demand for thermal power and the rebound in steel, cement, chemicals and other industries (the following supply expectations are mainly based on existing approved production capacity, and there may still be some nuclear capacity increases that need to be considered in the future).
medium and long term: Taking into account the resilience of demand and the release of the supply side, the industry is generally in a basically balanced situation of supply and demand. Thermal coal prices are expected to fluctuate at high levels.
3. Company advantages: resource advantage + profitability + dividend ability
(1) Coal business: abundant reserves of high-quality thermal coal and long mining life
The company has significant resource advantages and is mainly located in northern Shaanxi. As of 22 years ago, the company has retained resource reserves of 14.9 billion tons, recoverable reserves of 8.6 billion tons, a recoverable life of more than 70 years, and an approved production capacity of 143 million tons. The amount of resources ranks among the top in the industry. More than 90% of the coal in the
production area is high-quality coal with excellent coal quality. It is a high-quality thermal coal, gasification coal and ideal chemical coal with extra-low ash, extra-low phosphorus, extra-low sulfur, medium-high calorific value.
The company's production and sales have grown steadily. 's coal production and sales in 2021 were 136 million tons (+8% year-on-year) and 231 million tons (-5% year-on-year) respectively. In the first three quarters of 2022, the company's production and sales were 110 million tons and 175 million tons respectively, of which output increased by 6.8% year-on-year.
benefits from better coal mine conditions. The company has successively increased production capacity in the past two years, and production capacity is expected to expand further.
html Since 2021, the company's mines have increased their cumulative production capacity by 12 million tons, and the production capacities of Hongliulin, Caragana Tower, Zhangjiamao, Xiaobaodang and other coal mines under its jurisdiction have all reached the level of 20 million tons, and there is still room for improvement in the future.(2) Profitability: Net profit per ton of coal exceeds 300 yuan, profitability far exceeding the level of peers
Due to obvious resource advantages, some of the company's coal mines can be used as chemical coal and coking coal, and the comprehensive selling price has an advantage.
In the past two years, in accordance with the requirements of the National Development and Reform Commission, the company has continuously increased the proportion of Changxie coal. Due to the advantages of coal types, some of the company's mining areas are chemical coal and coking coal, because the average sales price is higher than other thermal coal companies.
html In 2022, the company's long-term price for thermal coal is based on Shaanxi Province's 5,500 kcal price of 320-520 yuan/ton, and the remaining chemical coal and coking coal are higher than this price.According to the announcement, the company’s average selling price in the first three quarters of 2022 was 724 yuan/ton, a year-on-year increase of 156 yuan/ton or 28%.Among them, the single-quarter selling price of Q3 was 802 yuan/ton, a year-on-year increase of 101 yuan/ton or 14%.
At the same time, due to better resource conditions, the company's cost per ton of coal is lower than that of its peers, and the cost is expected to remain at a low level in the long run. The company's average cost in the first three quarters of 2022 was 427 yuan/ton (including purchased coal), and the cost of self-produced coal was approximately 284 yuan/ton, which was a decrease compared with the same period in 2021. The company's total cost is much lower than that of its peers, reflecting its resource advantages.
html The net profit of 0 tons of coal reaches more than 300 yuan/ton, which is at the highest level among thermal coal companies. The company's net profit per ton of coal in Q1-Q3 was 335/330/313 yuan/ton respectively, which basically puts the company's profitability at the highest level in the industry. The average in the first three quarters was 326 yuan/ton (243 yuan/ton for the whole year of 2021).(3) Long-term growth: Acquisition of high-quality coal resources from major shareholders, there is still room for injection in the medium and long term
The company's production capacity growth in the past two years has come from the nuclear increase of advanced large mineral production capacity, and from the group's injection of 12 million tons of production capacity, and the future construction of Xiaohaitu Coal Mine of more than 20 million tons.
According to the announcement on October 28, the company plans to acquire the coal assets " Binchang Group " and "Shennan Mining" of 's controlling shareholder Shaanxi Coal Chemical Industry Group in cash through a non-public agreement.
At the end of November, Binchang Group has completed the delivery of and and industrial and commercial changes, and has been incorporated into the consolidated scope of the company's financial statements. Among them, the transaction consideration of Binchang Group is 14.3 billion yuan, and holds 99.6% of shares.
The Xiaozhuang Mine and the Mengcun Mine, two of the mines in production owned by Binchang Group, have an approved production capacity of 6 million tons per year. Among them, the Mengcun Mine has a recoverable reserve of approximately 600 million tons and a remaining service life of 69 years.
22’s total profit in the first seven months reached 1.2 billion yuan. After the transaction is completed, it is expected to increase the annual net profit by more than 1.5 billion yuan; the Shennan Mining transaction consideration is 20.4 billion yuan, and the shareholding ratio is 100%.
Shennan Mining owns the exploration rights for Xiaohaotu No. 1 and Xiaohaotu West, with recoverable reserves of 660 million yuan and 980 million tons respectively. Among them, the designed coal production capacity of Xiaohaotu No. 1 is 8 million tons per year.
As of the first half of 2022, Shaanxi Coal Group has an approved coal production capacity of 201 million tons, retained resource reserves of 30 billion tons, and recoverable reserves of 20.3 billion tons. There are still more than 40 million tons of unlisted coal production capacity at the group level, which is expected to continue to be injected into listed companies in the future. In addition to its current production capacity, the group also has coal resources such as Erlintu, and its long-term production capacity is expected to increase by more than 30 million tons.
(4) Dividend: The dividend ratio has been increased to more than 60%, and the dividend yield has significant advantages.
Since the company was listed in 2014, except for the year 2015 when no distribution was made due to losses, the dividends have been stable in the remaining years. In recent years, in order to actively reward shareholders, the company's actual distribution ratio and minimum dividend requirements have been increased, highlighting the investment value of and . Although the dividend ratio of
company has fluctuated midway, it is on an overall upward trend.
From 2014 to 2019, according to the requirements of the company's articles of association over the years, the company's dividend ratio was not less than 30%, and the average dividend rate reached 33.3% (in 2018-19, the company repurchased shares for
4. Profit forecast and valuation:
has stable profits, high dividend yield, and large room for improvement in medium and long-term valuation
(1) Core profit forecast assumptions
1. Regardless of the impact of continuing to acquire the group's assets, the company's output growth in the next two years will mainly come from the increase in existing coal mine production capacity and the increase in capacity utilization . It is expected that the company's raw coal output will increase by 3% and 3% year-on-year respectively in 2023-2024.
2. The proportion of long-term agreements in the company's coal sales structure is about 50%. It is expected that the company's proportion of long-term agreements will remain at the current level from 2023 to 2024. At the same time, the cost of self-produced coal is controllable, and the annual growth rate is controlled within 5%.
3. Due to the high investment income and non-recurring gains and losses contributed by the liquidation trust project in 2022, the company's investment return rate is expected to return to the normal level of about 2% in 23-24.
(2) Comparable company valuation analysis
The company has excellent resource endowment, the mining cost per ton of coal is at the low level in the industry, and the profitability is outstanding. It fully benefits from the high operation of the coal price center. The high dividend further highlights the value of a high-quality company. The company plans to increase the dividend ratio to 6 in 22-24 years. 0%, and it is expected that the actual level may exceed the promised level (the company previously planned to continue to pay steady dividends from 2020 to 2022, with a dividend rate of no less than 40% and a dividend amount of no less than 4 billion yuan. The actual dividend proportions in 2020 and 21 are as high as 52% and 62%).
In the medium and long term, the company has abundant reserve resource advantages. In addition to the Xiaohaotu mining area to be developed and constructed, the group also has high-quality Shaanxi resources such as Caojiatan and Erlintu. It is expected that the company's profitability and asset scale will be further improved in the medium and long term.
It is estimated that the company's net profit attributable to the parent company from 2022 to 2024 will be 35.07 billion yuan, 33.37 billion yuan and 35.03 billion yuan respectively, of which non-net profit in 2022 will be approximately 28.63 billion yuan. The performance growth in 2023 will mainly come from the profit growth of injected assets, as well as the company's sales and cost optimization.
refers to the valuation of comparable companies and the company's historical valuation center, giving the company 8 times PE in 23 years, corresponding to a reasonable value of 27.5 yuan/share.
5. Risk warning
1. The macroeconomic growth rate is declining, the demand growth rate is lower than expected, the supply growth is higher than expected under the pressure of maintaining supply and increasing production, and the import policy is relaxed, accelerating the deterioration of supply and demand relations, leading to an unexpected drop in coal prices.
2. The company’s costs increased beyond expectations.
3. The company’s primary and secondary market investments have suffered losses, etc.
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