\u3000\u3000 Huaihe Energy (Group) Co.Ltd(600575) (600575)
Key investment points
Event: on February 21, 2022, Huaihe Energy (Group) Co.Ltd(600575) issued the plan for absorption and merger of Huainan Mining (Group) Co., Ltd. and related party transactions. According to the plan, the company plans to absorb and merge Huainan mining industry by issuing shares, convertible corporate bonds (if any) and paying cash to Huaihe holdings, China Cinda, CCB investment, Guohua investment, BOC assets, Jikai group, Shanghai Electric Power Co.Ltd(600021) , CLP Guorui, Huaibei Mining Holdings Co.Ltd(600985) . The listed company is the merging party, and Huainan mining is the merged party. After the completion of this transaction, the listed company, as the surviving company, will inherit and undertake all assets, liabilities, businesses, personnel and all other rights and obligations of Huainan mining.
Comments:
Huainan Mining’s core coal, electricity and other assets will be listed as a whole, and the production capacity of listed companies will be greatly expanded: in terms of coal, according to the bond offer of Huainan mining, by the end of March 2021, the approved production capacity of the group’s mines in production was 76.1 million tons / year, including 9 local mines, 56.1 million tons / year and 3 Mengxi Inner Mongolia Eerduosi Resources Co.Ltd(600295) mines, The approved production capacity is 20 million tons. Considering that Dingji mine (6 million tons) has been injected into the listing platform, it is expected that 70.1 million tons of coal mine capacity will be injected this time. In terms of electricity, by the end of March 2021, the group had a total installed capacity of 37.81 million KW and an equity capacity of 16.73 million KW. Considering that the internal equity installed capacity of listed companies is 3.554 million KW, it is expected that there will be 13.5746 million KW this time. Overall, it is estimated that the coal production capacity of the listed company may increase by 1168.33% and the power production capacity may increase by 430.20%.
Earnings or thickening of listed companies: according to the Huaihe Energy (Group) Co.Ltd(600575) performance forecast, the net profit attributable to the parent company is expected to reach RMB 414-444 million in 2021. According to the announcement of Huainan mining, in the first three quarters of 2021, the company realized a net profit attributable to the parent company of 2.966 billion yuan and an annualized profit of 3.955 billion yuan. After the merger, it is estimated that the performance of listed companies may increase to 4.368-4.398 billion yuan, an increase of 891.14-955.75%.
After absorption and merger, a more complete industrial chain is expected to enhance the anti cycle ability of listed companies: at present, the main businesses of listed companies include thermal power, railway transportation and trade. After the transaction is completed, listed companies will form a coal gas (under construction) – power transportation integrated industrial chain. A more complete industrial chain will help the company enhance its competitiveness and resist the cycle.
Investment suggestion: absorption and merger will not be considered for the time being. It is estimated that the net profit of the company from 2021 to 2023 will be RMB 436 / 563 / 571 million respectively, and the corresponding EPS will be 0.11/0.14/0.15 respectively. It will be given an investment rating of overweight-a for the first time.
Risk tip: if the transaction is not approved, the transaction will be suspended and the coal price will plummet
