\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 699 Shanxi Lu’An Environmental Energydev.Co.Ltd(601699) )
Key investment points
Coal injection leader, with outstanding competitive advantage. Resource advantages: Lu’an lean coal is extremely low in sulfur, ash and phosphorus, with high calorific value and weak explosiveness. It is high-quality coal for blast furnace injection. The calorific value of mixed coal of the company’s products basically exceeds 5500 kcal, and that of injected coal is higher than 6300 kcal. The calorific value is high and the market competitiveness is strong. Technical advantages: coal injection in Lu’an breaks the theoretical limit of “anthracite is the main injection in blast furnace”, alleviates the shortage of anthracite supply in blast furnace, and has high replacement and safer. The company is the first high-tech enterprise recognized by the Ministry of science and technology of the people’s Republic of China and the only high-tech enterprise in China that has been rated continuously. Cost advantage: coal injection can completely replace coke in providing heat and reducing agent, and has obvious price advantage. Coal injection in Lu’an can save more pig iron cost and has the best economy.
Sitting on a number of large injection coal mines, there is room for continuous production increase. By the end of 2021, Shanxi Lu’An Environmental Energydev.Co.Ltd(601699) has 9 non integrated mines with a total capacity of 36.2 million tons / year and an equity capacity of 35.948 million tons / year. The main coal types are lean coal, gas coal and anthracite. Among them, Changcun (8 million tons / year), Wangzhuang (7.1 million tons / year) and Yuwu (7.5 million tons / year) coal mines can produce high-quality injection coal; 13 integrated mines, with an approved capacity of 13.2 million tons / year and an equity capacity of 9.525 million tons / year. The coal types are mainly 1 / 3 coking coal, gas coal and fat coal. The production of the mine and the nuclear increase of production capacity will open up the space for increasing production. On the one hand, the technical transformation coal mines Shangzhuang mine (900000 T / a) and Xinyu mine ( Shanghai Pudong Development Bank Co.Ltd(600000) T / a) have not been officially put into operation, and it is expected to bring an increase of 1.5 million tons of coal after being put into operation; On the other hand, the nuclear increase of mengjiayao coal mine is 1.8 million tons / year to 3 million tons / year. The nuclear increase of Yitian coal industry has passed the on-site verification. Heilongguan and Cilin mountain have been included in the list of capacity increase, and the output growth is expected.
The coal injection is not affected by the policy price limit, and the profit is highly flexible. On April 30, 2021, the national development and Reform Commission issued the announcement on clarifying the price bid up behavior of operators in the coal field, which made it clear that if the coal long-term association price exceeds the upper limit of the range (Shanxi 5500 kcal pit price 570 yuan / ton) and the spot price exceeds 50% of the upper limit of the reasonable range of the long-term association price (Qinhuangdao 5500 kcal port price 1155 yuan / ton, Shanxi 5500 kcal pit price 855 yuan / ton), it will be regarded as the price bid up behavior. We believe that the object of the announcement is the power coal used by power enterprises, and the injection coal and coking coal are not within the price limit Shanxi Lu’An Environmental Energydev.Co.Ltd(601699) blended coal accounts for about 57% of the sales volume, of which long-term cooperation for power terminals accounts for about 40%. The pricing mechanism of “base price + floating price” is adopted, in addition, it is priced by the market; The sales volume of injected coal accounts for about 38%, of which the long-term association accounts for about 60%, and the pricing mechanism follows the market. Affected by the price limit, the proportion of coal sales of the company is only 22.8% of the total sales, accounting for a relatively low proportion, and can fully enjoy the performance elasticity brought by the price rise. In the context of the price limit policy, Shanxi Lu’An Environmental Energydev.Co.Ltd(601699) can adjust the production and sales structure according to the market demand, and obtain a higher price advantage by increasing the sales proportion of injected coal. In 2021, the company’s coal injection sales accounted for 38%, a significant increase of 3 percentage points year-on-year.
Catalyzing the reform of state-owned enterprises, the group has more room for asset injection. The asset securitization rate of state-owned enterprises in Shanxi Province reached the target of 80% during the 14th Five Year Plan period. According to the calculation, by the end of March 2022, the asset securitization rate of Lu’an Group was 33.3%, far from reaching the target of 80% Shanxi Lu’An Environmental Energydev.Co.Ltd(601699) as the only listed entity of Lu’an Group, there is a large space for asset injection. The company has completed the acquisition of Cilin coal industry in 2019, with the approved production capacity increased by 5.4 million tons / year and the recoverable reserves increased by about 100 million tons. By the end of 2021, Lu’an Group has not injected listed companies and non integrated mines, with a production capacity of about 20.3 million tons / year, of which 8 million ton Gucheng Coal Mine and 7.5 million ton Gaohe energy coal mine are high-quality large mines. After the asset injection, the company’s revenue scale is expected to climb to a new level.
Earnings forecast, valuation and investment rating: we estimate that the company’s operating revenue from 2022 to 2024 will be 52.27 billion yuan, 55.188 billion yuan and 56.28 billion yuan respectively, and the net profit attributable to the parent company will be 9.544 billion yuan, 10.577 billion yuan and 11.131 billion yuan respectively, with earnings per share of 3.19, 3.54 and 3.72 yuan respectively. The current share price is 13.66 yuan, and the corresponding PE is 4.3x/3.9x/3.7x respectively. Considering the leading position of coal injection of the company, the asset quality is excellent, the valuation is low, and the superimposed coal market is good. It is covered for the first time and given a “buy” rating.
Risk tip: the construction progress of technical transformation mine is less than expected, the coal price drops sharply, the capacity utilization rate is less than expected, and the research report use information data is not updated in time.
