Power investment energy ( Huolinhe Opencut Coal Industry Corporation Limited Of Inner Mongolia(002128) )
Event: on April 26, 2022, the company released the first quarter report that the net profit attributable to the owner of the parent company in the first quarter was 1.512 billion yuan, a year-on-year increase of 49.53%; The operating revenue was 7.172 billion yuan, a year-on-year increase of 23.96%; The basic earnings per share was 0.79 yuan, a year-on-year increase of 49.06%.
Coal, aluminum and electricity are all oriented well, driving the release of the company’s performance. According to the announcement, the company’s net profit attributable to the parent company increased significantly, mainly due to the year-on-year increase in the comprehensive selling price of coal and aluminum products and the unit price of electricity sales, as well as the year-on-year increase in electricity sales. According to wind data, the price of 22q1 Jinzhou Port Co.Ltd(600190) lignite increased by 68.13% year-on-year, and the price of aluminum ingot increased by 36.4% year-on-year. The rise of coal and aluminum prices led to the release of the company’s performance.
The scale of new energy power generation continues to expand. In recent years, the company has continuously expanded its new energy power generation business. According to the announcement in the annual report, the company has been put into operation. The installed capacity of new energy power generation is 1.56 million KW. During the “14th five year plan” period, the company will still vigorously develop green power projects. By the end of the “14th five year plan”, the company plans that the installed capacity of new energy will reach more than 7 million KW, which has become another supporting point for the growth of enterprise profits.
Electrolytic aluminum is expected to maintain a high boom. Subject to the capacity “ceiling” of the electrolytic aluminum industry, it is expected that the electrolytic aluminum industry will maintain a high boom in 2022. The company has formed a coal, electricity and aluminum industry chain in Huolinhe area, has its own power plant close to the coal origin, has the advantage of power cost, and the profit of electrolytic aluminum business is expected to continue to grow.
Q2 is the off-season of thermal coal, and the price is expected to rebound with the improvement of demand. At present, the consumption of power coal has entered the off-season. At the same time, under the influence of the epidemic, the downstream power load is not high, and some generator units are overhauled, so the short-term demand is weak. At present, the demand side is the most off-season of the year. In addition to the impact of the epidemic, the demand has faced a “dark moment”. After increasing production and ensuring supply in 2021q4, the output basically reached the limit in the fourth quarter of 2021. Due to the limited new production capacity, there is little potential to continue to increase production. At the same time, the import volume continues to decline, and the total supply is expected to decline month on month. In the later stage, with the effective control of the epidemic, the demand suppressed by the epidemic is expected to be released, and the subsequent price is expected to rise. At the same time, the company’s coal products are mainly sold to Inner Mongolia, Jilin and Liaoning. Due to the withdrawal of coal production capacity in Jilin and Liaoning, the net transfer in of coal continues to grow, and the demand in the region where the company is located is strong, which is expected to support the price.
Investment suggestion: we predict that the net profit attributable to the shareholders of the parent company is expected to be 5.613 billion yuan / 6.031 billion yuan / 6.158 billion yuan from 2022 to 2024, and the corresponding PE multiples are 4 times, 4 times and 4 times respectively (based on the stock price on April 26, 2022). Considering the company’s active transformation to new energy in recent years, it is expected to obtain a valuation higher than that of pure thermal coal business. Therefore, we believe that the company’s valuation is expected to rebound and maintain the “recommended” rating.
Risk tips: 1) the change of regional market demand may lead to the decline of coal price; 2) The profit of thermal power may decline due to the liberalization of the power market and the risk of increased cost; 3) There are many new energy projects under construction, with the risk of policy change; 4) Electrolytic aluminum prices fell sharply.
