\u3000\u3000 Henan Shenhuo Coal&Power Co.Ltd(000933) (000933)
Event: the company released the performance forecast for 2021 on the evening of January 21. It is estimated that the net profit attributable to shareholders of listed companies will reach 3.107 billion yuan in 2021, with a year-on-year increase of 767.04%; The net profit attributable to shareholders of listed companies deducting non recurring profits and losses was 3.139 billion yuan, a year-on-year increase of 3503.23%.
Comments:
Asset impairment dragged down 2021q4 performance. In Q4, the company realized a net profit attributable to the parent company of 810 million yuan in a single quarter, down 3.4% month on month compared with Q3, and turned losses into profits year on year. Q4 net profit fell month on month, mainly due to the increase in asset impairment provision. In 2021, the provision for asset impairment and credit impairment loss was 3.44 billion yuan, an increase of 1.46 billion yuan compared with 2021q1-q3. The impairment part of the whole year includes: the provision for asset impairment of coal sector is 1.37 billion yuan (affecting the net profit attributable to the parent company by 600 million yuan), the credit loss of Huiyuan aluminum’s restructured creditor’s rights is 750 million yuan, the provision for asset impairment of Shenhuo power generation is 710 million yuan, the provision for impairment of Yongcheng aluminum plant and railway special line is 540 million yuan, and the provision for asset impairment of idle equipment is 80 million yuan (affecting the net profit attributable to the parent company by 60 million yuan).
The main business is stable, and the volume and price of coal and electrolytic aluminum rise simultaneously. If the impact of impairment provision and credit loss on the net profit attributable to the parent is added back, the company will realize a net profit attributable to the parent of about 5.79 billion yuan in 2021. The large increase in annual performance is due to the simultaneous rise in volume and price of electrolytic aluminum and coal. 1) volume: the sales volume of electrolytic aluminum is nearly 1.2 million tons, with a year-on-year increase of 400000 tons, which is due to the production of Yunnan Shenhuo. 2) Price: the average price of Changjiang nonferrous A00 aluminum in 2021 was 16260 yuan / ton, with a year-on-year increase of 19%; The average price of coal products also rose sharply.
Demand for repair, cost improvement, and profit per ton of aluminum is expected to remain high. As of January 20, the national spot inventory of electrolytic aluminum was 726000 tons, a cumulative decline of 312000 tons compared with the peak of 1038000 tons in November 2021. The completion of real estate and the demand for automobiles continued to improve. The output reduction of 2021q4 alumina was less than expected, and the alumina price fell from the high point of 4200 yuan / ton at the end of October 2021 to about 3100 yuan / ton (January 21, 2022). The cost side was improved, and the profit per ton of aluminum was significantly repaired. According to Baichuan Yingfu, as of January 21, the average gross profit of electrolytic aluminum industry was 3374 yuan / ton, up sharply from – 1231 yuan / ton in early December. We believe that the long-term surplus situation of alumina is difficult to change, and the profit of electrolytic aluminum is expected to remain high.
Profit forecast, valuation and rating: due to the impact of asset impairment and power restriction policy of Yunnan Province on electrolytic aluminum production, we lowered the performance forecast of the company in 2021 / 2022. It is estimated that the net profit attributable to the parent company in 2021-2023 will be 3.14/5.1 billion yuan respectively (compared with the previous adjustment range of – 2.8% / – 12.5% / + 0.3%), corresponding to the current PE valuation of 8 / 6 / 5x respectively, maintaining the “overweight” rating.
Risk tip: the uncertainty of the impact of Yunnan power restriction policy on output; Long term high risk of interest bearing liabilities; Risk of falling aluminum and coal prices.
