China Shenhua (601088) Company Research: Core Hard Assets of Long-term Investment Value
The entire industry chain is initially integrated.
Since the company’s listing, it has continuously integrated the high-quality assets of the National Energy Group to promote industrial synergies. At present, it has formed a “coal power road” for coal production → coal transportation (railroads, ports, highways) → coal conversion (power generation, coal chemical industry).Hong Kong’s “Hangzhou” preliminary integrated business model. The integrated business model can provide stable and reliable supply guarantees and an internal consumer market, and fully explore and obtain every alternative operating profit in the coal-based industry chain.
Long association locks volume and price, and the cost is obvious.
After the merger, the company’s coal sales are mainly based on the long-term agreed price of “base price + floating price”, which is significantly smaller than the local ones, and the profit of the coal segment is stable; instead, the company’s existing production capacity3.
500 million tons, of which open-air production accounts for nearly 40%, and the average production capacity of a single well exceeds 10 million.
Benefiting from simple geological conditions and excellent cost control capabilities, the company’s cost per ton of coal is 重庆耍耍网 much lower than the industry average, thus building a natural moat.
Coal-electricity joint venture, ironing cycle.
In order to improve the company’s ability to resist market risks, the company has actively developed the power sector since its inception, making full use of the advantages of the coal and transportation segments, and arranging coal-fired units around the pit mouths, along the railway, and in the “Haijinjiang” radiation area, as far as possibleReduce the need to ensure self-sufficiency of raw materials for coal-fired power plants.
By creating a “coal-electricity joint venture” model, the company can to some extent suppress the impact of coal price fluctuations on overall performance, and promote the healthy and stable development of the coal and power segments.
Road, port and air transportation to build an integrated transportation network and strive to maximize benefits.
The company is the only domestic coal supply company with a scale and integrated transportation network, covering railways, ports, and gradually three major sections. Depending on its strong transportation system, the company can seamlessly dock upstream coal resources with downstream end users and strive to achieve benefitsmaximize.
The bottom of the performance is clear, and the margin of safety is extremely high.
We make a flexible calculation of the company’s performance and believe that under extreme pessimism, the company’s net profit attributable to its mother will still remain at about 40 billion, the bottom of the performance is clear, and the margin of safety is extremely high.
The highest, when the spot price fell to 500 yuan / ton, the company’s own coal production may lead to a net profit reduction of 3.2 billion; because of the decline in coal prices, the decline in pit openings is smaller than the spot in the port, resulting in a decline in the gross profit of trade coalAt a pessimistic level, trading coal will cause the company’s net profit to return to motherhood to fall by 2 billion yuan.
Underestimating high dividends, the defense value is prominent.
After the merger, the company has always expected shareholders, insisted on a stable dividend strategy, and gradually distributed dividends of nearly 200 billion yuan since its listing.
Considering the company’s stable profitability, sufficient cash flow and expected gradual expansion of capital expenditures, high dividends in the future are still worth looking forward to.
At the same time, the company currently deducts only PE (TTM) only 8.
2 times, in the historical 19% quantile; PB (LY) is only 1.
17 times, in the historical 27% quantile, all far below the historical average, and the defense value is prominent.
Earnings forecasts and investment advice.
What do we expect the company to do in 2019?
Realize a net profit of 430 in 2021.
300 million, 424.
800 million, 435.
600 million, EPS is 2 respectively.
16 yuan, 2.
14 yuan, 2.
19 yuan, corresponding to PE is 8.
We believe that the company is an industry leader in the fields of coal, electricity, railways, ports, etc. and has strong competitiveness.
Benefiting from the synergy and preliminary integration advantages of the company’s “coal-electricity, road, port and shipping” entire industry chain, the bottom of the performance is still obvious during the downward cycle of coal prices, and its ability to resist risks is extremely strong.
At the same time, taking into account the company’s abundant cash flow, low debt, low capital expenditure, underestimation, and high and stable dividend ratio, the company’s defensive attributes are prominent in the context of the current market environment uncertainty script, so it was first covered and given a “buy”Rating.
Risk reminder: The coal price has fallen steeply, the benchmark price of the Long Association has been reduced, and the on-grid electricity price has been reduced. The company has experienced a security accident.