China Shenhua Energy Company Limited(601088) (601088)
Event overview
According to the report of China Energy News on December 3, 2021, The national development and Reform Commission announced the work plan for signing and performing medium and long-term coal contracts in 2022 (Draft for comments), which defined “benchmark price + floating price” Monthly pricing is implemented, floating up and down within a reasonable range of 550-850 yuan / ton. The benchmark price of underground coal contract is temporarily signed at 5500 kcal thermal coal of 700 yuan / ton. The benchmark price has been set at 535 yuan / ton since 2017. This is the first time for comments in five years. The price has been increased by 31%, exceeding the previous expectation of the market.
If the benchmark price is adjusted from 535 yuan / ton to 700 yuan / ton, considering that the weight of the benchmark price is 50%, without considering the change of floating price, it is estimated that the medium and long-term contract price will increase by 82.5 yuan / ton,
From 2017 to 21, the fluctuation range of Shenhua self-produced coal long-term association was 529-754 yuan / ton, and the five-year average price was 574 yuan / ton. After the increase, the average price is expected to be about 656 yuan / ton, an increase of about 14%. During 2017-21, the benchmark price of medium and long-term contract of underground coal remained unchanged at 535 yuan / ton, and the floating price reference index remained unchanged in addition to the increase of China’s coastal power coal purchase price index in 2018. Taking the long-term association price of Shenhua self-produced coal as an example, the average price in 2017-21 was 568 / 559 / 555 / 543 / 645 yuan / ton, the fluctuation range was 529-754 yuan / ton, and the five-year average price was 574 yuan / ton.
If the benchmark price is increased from 535 yuan / ton to 700 yuan / ton, considering that the weight of the benchmark price is 50%, regardless of the change of the floating price reference index, it is estimated that the medium and long-term contract price of underground coal can be increased by 82.5 yuan / ton on average, and the five-year average price of Shenhua self produced coal long term association can be increased to 656 yuan / ton, an increase of about 14%.
China Shenhua Energy Company Limited(601088) in 2017-20, the average net profit attributable to the parent company was 42.8 billion yuan. After the rise of coal price center and electricity price, the performance center is expected to increase by at least 10 billion yuan, the lower limit of performance is revised up to about 50 billion yuan, and the corresponding dividend rate is at least 5.6%.
China Shenhua Energy Company Limited(601088) the amount of self-produced coal deducting domestic power plants and investment power plants is about 200 million tons per year, The impact of the benchmark price increase of the long-term association for self-produced coal on the average selling price is about 40 yuan / ton (excluding tax), after deducting income tax and minority shareholders’ equity, the performance center caused by the rise of coal price increases by about 5 billion yuan. When Shenhua’s own power plant sells about 150 billion kwh of electricity every year and the electricity price increases by 0.03 yuan / MW, considering the investment income of power plant jointly invested with Guodian, the net profit attributable to the parent company increases by about 3 billion yuan after deducting income tax and minority shareholders’ equity. Shenhua is due to huangda line and Huanghua The future transportation performance increment brought by the port reconstruction will be about 2 billion yuan. Overall, Shenhua’s performance center will move up by about 10 billion yuan in the future, and the lower limit of performance will be about 50 billion yuan. Considering the 50% dividend rate of China Shenhua Energy Company Limited(601088) three-year dividend commitment, the current dividend rate of A-Shares is at least 5.6% and that of H shares is at least 8.3%.
We raised the forecast of net profit attributable to parent company for China Shenhua Energy Company Limited(601088) 2021-23 by RMB 54.6/58.6/60 billion, with a year-on-year increase of + 39% / + 7% / + 2%, corresponding to PE of 8 / 7 / 7 times, corresponding to a / H share dividend rate of 6.3% / 9.3% in 2021, maintaining the target price of RMB 27.12 and reaffirming the “buy” rating.
The medium and long-term benchmark price increase is higher than expected. Assuming that the spot price of port water coal in 2021-23 is 1000 / 700 / 700 yuan / ton, we raised the forecast of the company’s operating revenue of 253.1/251.2/250.1 billion yuan in 21-23 to 313.4/310.9/312.3 billion yuan, with a year-on-year increase of + 34% / – 1% / + 1% respectively, and raised the forecast of net profit attributable to parent company of 45.2/46/46 billion yuan in 21-23 to 54.6/586/60.1 billion yuan, with a year-on-year increase of + 39% / + 7% / + 2% respectively, The EPS forecast for 21-23 years was raised by 2.28/2.31/2.32 yuan / share to 2.75/2.95/3.02 yuan / share, with a year-on-year increase of + 39% / + 7% / + 2% respectively, corresponding to the closing price of 22.08 yuan / share on December 7, 2021, and PE was 8 / 7 / 7 times respectively. Measured by the promised dividend rate of 50%, the dividend rate of A-Shares in 2021 was 6.2% and that of H shares was 9.3%. Considering the logic of the company’s “cash cow”, maintain the target price of 27.12 yuan and reaffirm the “buy” rating.
Risk statement
Macroeconomic systemic risk; The release intensity and sustainability of the supply side of the coal industry exceeded expectations; The company’s coal output is lower than expected; Electricity price rise is less than expected; The railway traffic volume is less than expected; Uncertainty of future cash reinvestment, etc.
