China Shenhua (601088) [Concept] Coal Chemical Industry, Zhongzitou [Event Driven] Recently, the company released a performance forecast, which is expected to belong to the shareholders of listed companies in 2021

Shenhua, China (601088)

【Concept】

Coal chemical industry, Chinese character head

【Event-driven】

Recently, the company issued a performance forecast, and it is expected that the net profit attributable to shareholders of listed companies in 2021 will be about 50.3 billion yuan, an increase of about 11.1 billion yuan or 28% year-on-year.

【Technical Illustration】

【Industry Prospect】

(1) Coal Annual Investment Strategy: Big Wave Sand Sinker Gold (Huajin Securities Hu Bo "Coal Annual Investment Strategy: Big Wave Sand Sinker Gold")

Thermal coal: Considering the increase in supply and production, it is expected that the gap in thermal coal in 2022 will narrow compared with 2021. However, according to the long-term plan, if the output release rate in 2022 is too fast or will overdraw the future coal growth space, the thermal coal gap may expand again in 2023.

Coking coal and coke: both have a deep connection with the real estate industry, assuming that the tone of future housing is not speculated, or will form a certain pressure on coking coal and coke demand, and coking coal production capacity will have a certain amount in the next two years due to the nuclear increase in the fourth quarter. In terms of supply and demand, the gap between coking coal and coke will continue to narrow in the next two years, but there will be no obvious surplus.

【Core Advantages】

(1) The rise in volume and price is good for the release of annual performance, and Q4 supply guarantee promotes output growth (Huajin Securities Hu Bo", "Coal Annual Investment Strategy: Big Wave Sandstorm Sinker Gold")

Incremental output release: Cumulative coal production/sales in 2021 were 307 million/482.3 million tons, an increase of 5.3%/8% year-on-year; of which Q4 single-quarter output was 83 million tons, an increase of 15.3% month-on-month, or mainly driven by the guaranteed supply force.

Coal prices continued to rise month-on-month: in 2021, the average price of thermal coal was 648 yuan / ton, up 19% year-on-year, setting a record annual average price; of which the average price of Q4 was 744 yuan / ton, up 12.3% month-on-month, although the impact of limited prices on spot coal prices in ports fell back to a high level, but the performance of long-term prices was relatively stable.

(2) The long-term investment value of the leading enterprise is highlighted (Chen Chen of Zhongtai Securities and others, "The volume and price of the coal business have risen together, and the performance growth in the first three quarters has been stable")

Long-term association benchmark price increase: In December 2021, the National Development and Reform Commission raised the annual long-term association benchmark price to 700 yuan, an increase of 31% over the previous long-term implementation of the 535 yuan benchmark, and the company will take the lead in benefiting due to the high proportion of long-term sales model. According to the CCTD, the annual long-term price in January 2022 still maintained a relatively high level of 725 yuan, which continued to be good for the company's performance release.

High Dividends and High Dividends: In terms of dividends, excluding special dividends, if dividends are distributed at a minimum promised dividend rate of 50%, dividends are expected to be 25.2 billion yuan and dividends per share of 1.27 yuan in 2021, and the dividend yield of A/H shares is 5.4%/7.7% respectively based on the latest closing price. Dividend yields remain attractive and the long-term investment value of the leading players is highlighted.

【Risk Warning】

The benchmark price of the annual long-term coal was lowered; the cost of mining increased.

Risk Warning: The content of the review is for reference only and does not represent a recommendation and basis for anyone to buy and sell.

Investors operate accordingly, at their own risk and benefit. The stock market is risky, trading needs to be cautious!