Event: on February 24, the national development and Reform Commission issued the notice on further improving the coal market price formation mechanism, which made it clear that the medium and long-term tax inclusive price of underground coal (q5500) in Qinhuangdao port is between 570 yuan / ton and 770 yuan / ton, Compared with the price range (550 yuan / ton – 850 yuan / ton) announced in the work plan for signing and performing medium and long-term coal contracts in 2022 (Exposure Draft) at the end of December last year.
The operating range of coal price is basically determined. (1) The new medium and long-term price range was narrowed to 200 yuan / ton, and the price stability was further enhanced; (2) At present, the long-term association price of thermal coal is 720 yuan / ton. Within a reasonable range, considering the freight and loading and unloading costs, the ore drawing price of the long-term association is also within a reasonable range. The impact of the notice on the current long-term association price is relatively limited; (3) Recently, under the influence of government regulation, the prices of ports and pits have been reduced to varying degrees, and the price operation range is basically determined.
Foreign coal prices are generally strong, and higher than China’s coal prices. (1) As of March 7, the price of Guangzhou Port Company Limited(601228) imported Indonesian coal (q4800) was 900 yuan / ton, the same as last week; As of March 1, spot prices of steam coal in the three ports of Ara and Newcastle in Europe have remained at a high level, 33% – 81% higher than the price of China Shipbuilding Industry Group Power Co.Ltd(600482) coal; (2) Due to the escalation of the conflict between Russia and Ukraine and the rapid rise of oil prices, as of March 4, the price ratio of coal to oil fell to 1.28, 13.35% lower than the average level since 2010 (1.47). From the perspective of mean reversion, this means that the trend of coal prices may be stronger than that of oil in the future.
Inventory is still at a low level in the same period, and the tension between China’s coal supply and demand has eased slightly. (1) As of March 7, the coal inventory of Qinhuangdao port was 5 million tons, up 80000 tons (+ 1.63%) compared with last week, still at a low level in the same period. (2) As of the week of March 3, the average daily coal consumption of power coal terminals in 25 provinces was 5.45 million tons (accounting for about half of the country), down 3.71% on a weekly basis, while the weekly operating rate of 110 coal washing plants (accounting for about 5% of the country) in the same period was 70.7%, down 0.52% on a monthly basis, and the tension between coal supply and demand in China has eased slightly; (3) Under the background of “steady growth”, the industrial coal consumption and power consumption will increase year-on-year, and the residential power consumption will continue to increase, which lays the foundation for the growth of coal demand.
The medium and long-term tight balance of coal is worth looking forward to. (1) According to the 2020 annual report on coal industry development issued by China Coal Industry Association, by the end of the 14th five year plan, China’s coal output target is to control at about 4.1 billion tons, while the national raw coal output in 2021 is 4.13 billion tons, which means that the growth space of national coal output in the future is very limited; (2) Coal for energy consumption accounts for 69% of the coal demand. According to the prediction of China Power Council, the power consumption of the whole society will increase by 5% – 6% year-on-year in 2022. In recent years, the proportion of coal in energy consumption has slowed down. According to our calculation, there is still room for growth in coal demand; (3) Referring to the carbon peak in the United States and Japan, it is expected that China’s coal consumption will maintain a high level before the carbon peak (2030).
Investment suggestion: it is suggested to pay attention to the allocation value of the coal sector. We expect that the quarterly average net profit of thermal coal enterprises in 2022 will remain at the average level of the third and fourth quarters of 2021. According to the closing price on March 7, the dynamic PE of most thermal coal enterprises in 2022 is about 7 times; The average net profit of coking coal and anthracite enterprises in the quarter of 2022 will be close to the profit level in the fourth quarter of 2021, corresponding to a dynamic PE of about 7.56 times in 2022. The net profit of power coal enterprises will increase by 27% – 88% and that of coking coal and anthracite enterprises will increase by 20% – 73% for each subsequent increase of 100 yuan / ton of power coal (corresponding increase of 220 yuan / ton of coking coal). It is suggested to pay attention to the allocation value of coal sector. Considering the valuation, flexibility, dividend yield and product added value, it is recommended to pay attention to Jizhong Energy Resources Co.Ltd(000937) , Jinneng Holding Shanxi Coal Industry Co.Ltd(601001) , Shanxi Coal International Energy Group Co.Ltd(600546) , Shan Xi Hua Yang Group New Energy Co.Ltd(600348) .
Risk tips: (1) macroeconomic uncertainty risk; (2) Risks of policy regulation; (3) The policy risk of relaxing the approval of new coal production capacity; (4) Risks of poor management of the company; (5) The risk of a sharp fall in international energy prices.
