CHINA COAL(601898)：SLIGHT MISS IN 2023 EARNINGS

China Coal’s net profit edged up 2% YoY to RMB20.2bn in 2023 under IFRS, 6% below our forecast. The discrepancy mainly came from the higher-than-expected cost and lower-than-expected ASP for coal. Looking ahead, we expect its earnings to drop 7% YoY in 2024 mainly on lower coal prices. We trim our 2024/25 earnings forecasts by 6%/8% after post-results adjustments. We reiterate our HOLD call on its H shares with target price lowered to HK$7.32. While its P/E is still at the bottom among its peers, its dividend is also the lowest given the company’s reluctance to raise payout ratio despite improved balance sheet.
Key Factors for Rating
The company’s earnings in 2023 fell short to our forecast mainly because its realised coal price was 1% below our forecast and its unit coal production cost was 2% above our forecast. In addition, the profit from associates was 17% below our forecast. The company’s core earnings actually dropped 29% YoY in 2023 after removing the huge RMB8.7bn impairment in 2022. That explained why its reported net profit can still grow despite realised coal price fell 16% YoY.
The company’s guidance for 2024 was quite conservative: outputs of self- produced coal and polyolefin no less than 129m tonnes and 1.45m tonnes respectively. These are flat compared to the sales volume of 133m tonnes and 1.48m tonnes respectively in 2023.
We now expect its earnings to drop 7% YoY in 2024 mainly on an estimated 4% YoY dip in realised coal price for self-produced coal. We expect the average spot benchmark thermal coal price to drop 10% YoY to RMB873/tonne and the price has recently dropped to RMB855/tonne.
The company keep its payout at 30% for 2023 despite it is already in net-cash position as its capex budget remains higher for 2024 (up 2% YoY to RMB16bn). This inevitably disappoints some shareholders.
Key Risks for Rating
Higher-than-expected coal prices.
Lower-than-expected costs.
Valuation
We reduce our target price for its H shares from HK$7.92 to HK$7.32 as we lower our target valuation from 0.6x 2024E P/B to 0.57x as the average 2023- 25E ROE drops from 13.4% to 12.8%.
We also lower our target price for it’s A shares from RMB11.17 to RMB10.51. We still base our target price on its 3-month average A-H premium which has widened from 54% to 56% since late January.
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   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。