\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 666 Pingdingshan Tianan Coal Mining Co.Ltd(601666) )
China’s largest producer and supplier of low sulfur and high-quality main coking coal Pingdingshan Tianan Coal Mining Co.Ltd(601666) is located in Pingdingshan mining area, a large national coal base. It has rich reserves and complete types of coal. Its products are mainly blended coal and smelting clean coal. The varieties of clean coal are mainly coke concentrate, 1 / 3 coke concentrate and fertilizer concentrate. It has the inherent advantages of low sulfur, low ash, low phosphorus, low alkali metals, good thermal index and less harmful elements. It is a scarce strategic resource in the world. The quality and production capacity of main coke coal rank first in the country, and some indicators are better than imported coal, Favored by the market. By the end of 2021, the company has 14 mines with recoverable reserves of 900 million tons and production capacity of 32.03 million tons. In 2021, the output will be 29.67 million tons (clean coal output of 11.88 million tons).
Clean coal strategy: increase the quantity and price, and climb the performance to a new level Pingdingshan Tianan Coal Mining Co.Ltd(601666) continue to implement the “clean coal strategy” in depth, continuously increase the intensity of raw coal washing, and deeply excavate the value of coal products. The proportion of clean coal will increase from 22% in 2015 to 40% in 2021. From 2015 to 2021, the compound growth rate of clean coal output was 9.3%, and the compound growth rate of comprehensive selling price of commercial coal was 19.6%. The price of coking clean coal is high and is not affected by the government price limit. It can fully enjoy the performance elasticity brought by the price rise, so as to improve the profitability of the company. In addition, in August 2021, the company won the “Jiazhai Tangjie coal exploration right in Baofeng County, Henan Province” with 5.781 billion yuan, and obtained 1.43 billion tons of resources. The types of coal seams are coking coal, 1 / 3 coking coal and fat coal. The company’s deep coal seams, such as Jizu formation, mainly composed of main coking coal and fat coal, are expected to have a record high output of clean coal, and the high-quality endogenous growth can be expected.
Reduce staff and improve efficiency: separate the main and auxiliary, and move towards high-quality development. The company plans to reduce the number of employees from 86000 (2019) to less than 40000 in 5-8 years. Remarkable results will be achieved in reducing the number of employees from 2020 to 2021, with a total of 21000. Calculated according to the per capita salary of the current year, the cumulative labor expenditure will be reduced by 2.7 billion yuan, resulting in obvious efficiency gains. In March 2022, Pingdingshan Tianan Coal Mining Co.Ltd(601666) announced that it planned to divest the auxiliary production and living service institutions (including personnel and business) and related assets not directly related to the main coal industry to China Pingmei Shenma Group. The separation of main and auxiliary industries is expected to peel off some personnel of production, living assistance and logistics organs. The stripping of auxiliary industries is conducive to the lean and efficient main coal industry, enhance core competitiveness and help the high-quality development of the company. We believe that with the continuous deepening of the company’s strategy of reducing staff and improving efficiency, the goal of reducing staff to less than 40000 people can be successfully realized, the company’s operation quality will be improved, and its performance is expected to climb to a new high.
High dividend cash cow, highlighting the value of the company’s allocation. According to the shareholder dividend return plan for 20192021, in principle, the profit distributed by the company in cash every year shall not be less than 60% of the distributable profit in the consolidated statements realized in that year, and the dividend per share shall not be less than 0.25 yuan. In the past three years, we have successfully fulfilled the commitment of 60% high proportion dividend, enhanced the attribute of cash cows and highlighted the value of allocation. Under the background of high prosperity of the coal industry, the volume and price of the company’s main coal business have risen simultaneously, and its performance has reached new highs. In 2021, the net cash flow from operating activities exceeded 8 billion yuan, and the book cash was nearly 9 billion yuan. We believe that Pingdingshan Tianan Coal Mining Co.Ltd(601666) has the willingness and ability to maintain high dividends.
Profit forecast and Valuation: Based on the judgment of the future demand and price changes of the industry, we predict that the net profit attributable to the parent company in 20222024 will be 6.047 billion yuan, 6.477 billion yuan and 6.856 billion yuan respectively (6.052/8.033 billion yuan in the previous 20222023), with a year-on-year increase of 107%, 7% and 6%, equivalent to EPS of 2.61, 2.80 and 2.96 yuan / share respectively. The current share price is 13.83 yuan, corresponding to PE of 5.3, 4.9 and 4.7 times respectively. Considering the serious coal shortage outside China, the continuous high prosperity of coking coal industry and steady growth, the downstream demand is expected to be better and the coking coal price is supported; The company’s products are of high quality and China’s leading edge is obvious. After the increase of sales price, the company’s performance is expected to maintain high growth. At present, the valuation is low and the company’s “buy” rating is maintained.
Risk tips: (1) the risk of coal price falling beyond expectations. (2) Safety production risk. (3) Macroeconomic downturn risk. (4) The public materials used in the research report may have the risk of information lag or untimely update.
