\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 088 China Shenhua Energy Company Limited(601088) )
Event: on March 25, 2022, the company released its annual report for 2021. In 2021, it realized an operating revenue of 335216 billion yuan, a year-on-year increase of 43.7%; The net profit attributable to the shareholders of the company was 50.269 billion yuan, a year-on-year increase of 28.3%; The basic earnings per share is 2.53 yuan. It plans to distribute the final dividend of 2021 to all shareholders of RMB 25.4 per 10 shares (including tax).
The performance of 2021q4 fell month on month. According to the calculation of the announcement, the net profit attributable to the shareholders of the parent company in 2021q4 was 9.518 billion yuan, an increase of 69.72% year-on-year and a decrease of 35.36% month on month. In 2021q4, the provision for asset impairment loss was 1.286 billion yuan, and the provision for credit impairment loss was 2.601 billion yuan, totaling 3.887 billion yuan. The impairment affected the release of the company’s performance.
The proposed cash dividend is 50.466 billion yuan (including tax), with a dividend rate of 9.35%. According to the announcement, the company plans to distribute the final dividend of RMB 25.4 (tax included) for every 10 shares in 2021 to all shareholders, and plans to distribute a cash dividend of about RMB 50.466 billion (tax included), accounting for 100.4% of the net profit attributable to the shareholders of the company under the Chinese accounting standards for business enterprises in 2021. Based on the share price on March 25, 2022, the dividend rate reaches 9.35%. Since its listing in 2007, China Shenhua Energy Company Limited(601088) has implemented cash dividends for 14 times, with a cumulative cash dividend of up to 270063 billion yuan and an average dividend rate of 49.17%. The company has stable performance, abundant cash flow and less capital expenditure. It has a high dividend basis. The continuous high bonus also highlights the investment value of the company and is expected to help improve the valuation of the company.
The steady growth of coal production and sales is expected to benefit from the rise in coal prices. In 2021, the company achieved 307 million tons of commercial coal output, a year-on-year increase of 5.3%, and 482.3 million tons of coal sales, a year-on-year increase of 8%. In terms of price, the comprehensive selling price of commercial coal in 2021 was 588 yuan / ton, a year-on-year increase of 43.4%. In terms of cost, the unit cost of self-produced coal was 155.5 yuan / ton, a year-on-year increase of 20.9%. In 2021, the coal business achieved an operating income of 57.382 billion yuan, a year-on-year increase of 73.6%, and the operating rate of return was 19.6%, a year-on-year increase of 2.2 percentage points. In 2022, the benchmark price of the long-term association increased from 535 yuan / ton to 675 yuan / ton, an increase of 26%. The total sales volume of the company’s annual long-term association and monthly long-term association accounted for 83.4% of the total sales volume. Therefore, the upward movement of the price center of the long-term association is expected to promote the rise of the company’s comprehensive selling price and the release of performance.
The potential of coal production is expected to be released. In 2021, 667 hectares of land for continuous production of Beidian Shengli No. 1 open pit mine of the company obtained the approval procedures for grassland requisition; Baorixile open-pit mine has 600 hectares, Heidaigou Open-pit Mine has 321 hectares and harwusu open-pit mine has 289 hectares of continuous mining land, which has obtained the preliminary approval of construction land. The output of the company is well connected, and the output is expected to be released continuously in 2022. In addition, in 2021, the company obtained the permit for detailed investigation and exploration of coal resources in Taigemiao south area of Xinjie. At present, the company is making preliminary preparations for Xinjie well 1 in Taigemiao mining area of Xinjie, and the potential of the company’s coal production capacity is expected to be released in the future.
The profitability of power business is expected to improve. The total generating capacity of the company in 2021 was 166.45 billion kwh, with a year-on-year increase of 22.1%, mainly due to the centralized operation of new units in 2021. According to the announcement, the installed capacity of units put into operation in 2021 was 6320mw. The company’s unit power sales revenue was 348 yuan / MWh, a year-on-year increase of 4.2%, and the unit power sales cost was 348 yuan / MWh, a year-on-year increase of 26.1%. Due to rising costs, the operating income of power business decreased by 62.3% year-on-year to 3.01 billion yuan, and the operating income rate decreased by 11.4 percentage points to 4.7%. The national development and Reform Commission issued the notice on further deepening the market-oriented reform of on grid electricity price for coal-fired power generation, expanding the floating range of transaction price in the coal-fired power generation market from the current floating range of no more than 10% up and 15% down in principle to no more than 20% up and down in principle. This will help the company’s power generation division to transmit the increase of coal-fired costs. It is expected that the profitability of the company’s power business is expected to improve in 2022.
The transportation business remained stable. In terms of railway business, the self owned railway transportation turnover was 30.34 billion ton kilometers in 2021, with a year-on-year increase of 6.2%, and the operating income was 16.276 billion yuan, with a year-on-year decrease of 2.7%. In terms of ports, tonghuanghua port and Shenhua Tianjin Coal Terminal completed a total coal shipment of 261.4 million tons, a year-on-year increase of 4.9%. The port business realized an operating income of 2.699 billion yuan, a year-on-year increase of 0.9%. The freight volume of shipping division was 121.2 million tons, with a year-on-year increase of 7.3%; The shipping turnover was 112.1 billion tons of nautical miles, a year-on-year increase of 20.5%. The shipping business realized an operating income of 981 million yuan, a year-on-year increase of 369.4%, mainly due to the increase of sea freight price. On the whole, the transportation business remained stable.
Olefins were supplemented by price, and the profit increased significantly: according to the announcement, the company sold 644500 tons of polyolefin products in 2021, a year-on-year decrease of 8%, including 332800 tons of polyethylene, a year-on-year decrease of 6.8%, and 315600 tons of polypropylene, a year-on-year decrease of 4.7%. In terms of price, the price of polyethylene increased by 21.7% year-on-year to 6641 yuan / ton, and the price of polypropylene increased by 13.9 to 6853 yuan / ton year-on-year. In 2021, the coal chemical division realized an operating income of 722 million yuan, a year-on-year increase of 176.6%.
Investment suggestion: adjust the profit forecast according to the performance forecast and the current coal price. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be 63.112 billion yuan, 67.29 billion yuan and 69.024 billion yuan, with corresponding EPS of 3.18/3.39/3.47 yuan / share and PE of 9 times, 8 times and 8 times respectively on March 25, 2022. The valuation in the industry is low.
In addition, in view of the high dividend nature of the company, we compare Shenhua with China Yangtze Power Co.Ltd(600900) in that the cash dividend payout rate of China Yangtze Power Co.Ltd(600900) has remained above 50% since its listing. The cash dividend payout rate from 2016 to 2020 was 60% ~ 70%, and the dividend rate was between 3% ~ 5%. China Shenhua Energy Company Limited(601088) continued to pay dividends of more than 40%, with a dividend ratio of more than 90% in recent two years, reaching 9% ~ 10%. Based on the high dividend rate, We believe that China Shenhua Energy Company Limited(601088) should obtain a higher valuation than the coal company. With reference to 6009 Shanghai Kehua Bio-Engineering Co.Ltd(002022) 17 times PE (as unanimously expected by wind), we give a certain valuation premium based on the average valuation of thermal coal (8 times PE), that is, 11 times PE, corresponding to the target price of 34.98 yuan. Maintain a “recommended” rating.
Risk tip: coal prices have fallen sharply, the demand for thermal power is lower than expected, and the construction of projects under construction is slower than expected.
