Monthly key data tracking:
Supply side: on January 17, according to the data of the National Bureau of statistics, in December 2021, the national raw coal output was 384.67 million tons, a year-on-year increase of 7.2%, an increase of 2.6 percentage points over the previous month. An increase of 10.7% over the same period in 2019 and an average increase of 5.2% over the two years. On a month on month basis, the raw coal output in December increased by 13.83 million tons or 3.73% compared with that in November, and the growth rate narrowed by 0.12 percentage points compared with that in the previous month. From January to December 2021, the country’s cumulative raw coal output was 4071.36 million tons, a year-on-year increase of 4.7%, an increase of 0.5 percentage points over the previous November. It increased by 5.6% over 2019, with an average growth of 2.8% in the two years. Demand side: on January 17, according to the data of the National Bureau of statistics, in December 2021, the national power production changed from increase to decrease. In December, China’s absolute power generation was 723.4 billion kwh, a year-on-year decrease of 2.1%, a year-on-year increase of 0.2% over the previous month, an increase of 10.54% over the same period in 2019, and the average daily power generation was 23.3 billion kwh. The absolute power generation of thermal power in China was 543.3 billion kwh, with a year-on-year decrease of 4.9%, an increase of 2.4 percentage points over the previous month, and an average increase of 1.9% in two years. From January to December 2021, the absolute thermal power generation capacity in China was 5770.2 billion kwh, with a year-on-year increase of 8.4%, 1.5 percentage points lower than that in the previous November.
Industry judgment: under the guidance of the policy of ensuring supply and price stability, the national raw coal production reached the highest point in history in 2021. China has sufficient coal resources. What the market lacks is the output, not the production capacity. It is safety, environmental protection supervision and accident factors that restrict the production willingness of coal enterprises. We believe that at least during the peak period of winter coal consumption, China’s current supply intensity will continue. Under the background of the overall economic slowdown, the supply and demand pattern will be relatively loose. At the same time, the inventory of downstream terminals is in a relatively safe position. After the high demand falls, the coal price will enter the downward channel.
Investment suggestion: it is expected that the coal price will be corrected after the heating season, so the leading companies that benefit from the upward movement of the price center of the long-term association and lower costs have better investment performance price ratio. In the medium and long term, it is expected that the supply and demand of coal will be basically balanced in the next five years, the profitability and cash flow of leading coal companies are expected to remain high, and the market of enterprises (coal chemical industry and new energy) actively arranging transformation business will also give higher valuations.
It is suggested that bargain hunting should pay attention to three main investment lines: first, the thermal coal leader China Shenhua Energy Company Limited(601088) , Shaanxi Coal Industry Company Limited(601225) with high proportion of long-term association and high dividend rate; Second, Yankuang energy, which is gradually transformed to new energy based on coal.
Risk tip: large scale production restriction of downstream terminals, disturbance of epidemic situation, slowdown of macroeconomic growth, safety accidents and relaxation of control over imported coal.
