Key investment points:
The moat source of the coal industry is mainly cost advantage. Enterprises in resource industries (nonferrous metals, coal and oil) have strong product homogeneity, so their moat source is mainly cost advantage (with mines and low mining cost), which mainly depends on the location of enterprise mines / coal mines / oil fields.
The moat source of the coal industry also includes intangible assets (quotas). China is the largest coal producer and consumer, and “coal thermal power” is also the main source of energy in China at present. With the “carbon peak · carbon neutralization” becoming China’s international commitment, it is necessary for the coal industry to eliminate backward energy, release high-quality production capacity, improve quality and efficiency, so as to add high-quality production capacity (quota) becomes the source of marginal increment.
Resources and costs are the core. The profitability of upstream mining and beneficiation enterprises is stronger than that of coal chemical enterprises in the middle reaches. As a mining and beneficiation enterprise, low cost is the key to profitability (especially in the downward period of the industry).
Low debt and high dividend are preferred. With the state’s management of annual coal output and production capacity, and the coal price involves the cost of thermal power generation (it is still the main source of energy in China at present), which gives birth to the long-term association price of coal power linkage. The demand is relatively stable and the elasticity is insufficient. Therefore, the profitability / operation capacity of coal mining and dressing enterprises is more important. We suggest paying attention to enterprises with low debt and high dividend.
Risk tips:
Whether a company has a moat is subjective. We may not find the moat of an industry and make the first kind of mistakes; It may also mistake an industry without a moat for a moat, thus making the second kind of mistake.
The depth of a company’s moat may change over time. Some business strategies will deepen their moat, while others will weaken their moat, which needs to be viewed from a dynamic perspective.
