The coal industry: prices will continue to rise
June 11 to 12, days with the 2008 “Building a New Order” summer investment strategy will be held at the Presidential Plaza Hotel Beijing. The coal industry in Shanxi Securities analyst Zhang Hongbing Research Alliance participants issued a “spend, and God to – 2008 in the second half of the coal industry investment strategy” on the topic.
My presentation was entitled to spend, and God. Has this subject because we charge the cost of the coal industry policy into the harvest after a period of confidence to do this and the end of last year’s strategy report, “Can higher level” is consistent. Strategy Report last year, we have full confidence on the coal, boldly predicted the rise in coal prices this year, about 15%, then our forecast is also the highest in the first, and now look at our forecast has become a reality, and coal blocks After tape systemic risk-adjusted, the collective reaction of coal blocks, coal blocks of performance far beyond the broader market, the rebound was gorgeous a quarterly basis.
For the second half of the investment strategy, we remain optimistic about the coal industry or particular sub-sectors of coking coal, coal if the coal linkage to the successful implementation also still has a chance, the following four areas we will explain our point of view.
1. Performance of rapid growth path channel
07 major listed companies in the coal industry, operating income increased by 27.47% year on year, net profit attributable to parent company rose 20.83%, profit growth is less than revenue growth, resulting in gross margins from the coal industry in 2006 to 42.76% down to 07-year 40.22%. The same period, the major coal companies in Shanxi Province revenues grew 18.77%, net profit attributable to parent company, rose 3.5%, revenue growth and profit growth was lower than the industry average, Datong Coal Industry (601 001
stock it , Quotes , Information , main trading ) coal operating margin is down 10 percent Shanxi coal listed companies, operating margin declined by more than the industry average.
Company performance can be attributed to growth factors (1) Industrial diversification; (2) coal production and sales volume growth and raise the price of coal; (3) the price of coal upgrading and proper cost control. Coal gasification (000 968
stock it , Quotes , Information , main trading ) increased rapidly to benefit from a third reason, other enterprises relatively stable growth, the National Yang New Energy (600 348
stock it , Quotes , Information , main trading ) net profit fell 30% even.
Led to increase in 2007 is not the coal industry and increased profits because of rising raw material and labor costs. The Shanxi Province, in addition to raw material and labor costs, imposed in March 2007 from the Sustainable Development Fund and collected mine from October Transferring funds and environmental recovery and management of three funds and other margin is increased the cost pressure of coal enterprises in Shanxi Province , resulting in Shanxi Province, below the industry average rate of profit growth. Although coal prices in 2007 rose a more substantial, but a higher degree of coking coal market has jumped more than coal to increase, making coal company’s gross profit margin also decreased greatly. Datong Coal Industry in 2007 consolidated coal production cost is 179 yuan / ton, up 22.3% year on year, while the average selling price of coal was 333.15 yuan / ton, up decreased by 1 yuan / ton, the cost increase is far higher than the price increase; States Yangxin to 2007 annual comprehensive production cost is 264 yuan / ton, rose 5 yuan / ton, while the consolidated price is down 0.04%, while the impact of related party transactions can make the country a new sun a larger decline in performance. Shanxi’s coal business costs rise higher than the provincial other companies, price increases are lower than the provincial company, led growth in 2007 is relatively slow performance.
The first quarter of this year removed the coal industry in the coal, Shenhua, the country can vote and ST level after the first quarter net profit rose 62.96%, net profit has entered a period of rapid growth, industry sales of 10.99% profit margin, in the past four years the best level of cost margin from 8.25% last year increased to 12.74 percent, revenue growth has increased 7 percentage points over last year, revenue growth than cost growth accelerated profit growth also is rational , Shanxi Province, the policy of the future cost of coal enterprises have limited growth, the growth space is relatively too large to make up for the coal industry has entered a post-harvest safety event of default, we expect the coal industry profits will increase by mid-year report at 60%.
2. Supply and demand balance remains tight
Supply:
To do electrical work summer peaks, the NDRC urged coal-producing province and medium-sized coal mines should strive to increase production; speed up the inspection work of small coal mines resume production, timely release of safety production license; railway transport enterprises to make reasonable arrangements transportation plan; power plants to coal storage during the summer peaks to ensure that the level of not less than 15 days; crack down on any price increase of coal, adulterated, etc., and resolutely abolished according to law, democratic legal intermediary.
Market is very worried about a small coal mines resume production on the impact of market supply, and our monitoring data show that the proportion of total production output of small coal mines in recent years has been maintained at 35%, while the output of small coal mines in February this year, only 6.63 million tons, the output of the total yield 4.81%, March output rose to 30.72 million tons, accounting for 18.07% ratio of total output, output of 70.68 million tons in April, accounting for 33.17 percent the proportion of the total output of small coal mines in production gradually recovered to normal level, while at the same everywhere more attention to production safety work, especially on the eve of the Olympic Games, Shanxi Province recently issued a “Monitoring System in Shanxi coal production regulations”, Linfen City recently issued a hidden mine safety investigation and management of the implementation of the special action program, we believe that the complex of small coal mines produced little effect on the whole supply, production growth will depend on the future integration of resources in the contribution of state-owned coal mines, 1-April state-owned key coal production increased by 13.3%, the proportion of future production of medium and small coal mines will be adjusted to 56:17 : 27, small coal production growth is limited, we have always believed that through the paid use of resources and market-based mechanisms, the development of small coal mines to be rational.
From the inventory point of view, the whole society of coal stocks remained virtually unchanged, slightly decreased slightly; coal companies stock has dropped more dramatically, in April fell 41.6%, indicating that downstream demand; direct supply plant stock fell 18.5%, coal storage in the number of days for 11 days, as of May 30, the National 100 thousand kilowatts or more coal-fired power plant 43.81 million tons of coal stocks, with the exception of Hebei, Anhui, Hunan, Hainan Province, coal stockpiles below the warning level (7 days) outside , the rest of the normal coal supply, direct supply of coal power plant stock average number of days available for 11 days, but basically at the Qinhuangdao highest level of inventory, he explains the downstream sectors are not enthusiastic about storing coal, electric power companies more cash flow shortage, and the other side is port number of reasons. Some time ago introduced the “electricity generating companies and grid liquidation” could make a turnaround in cash flow, inventories are still at a whole range of control.
This year, the coal industry appears strong rebound in fixed asset investment growth, investment growth rate of over 40%, far exceeding the total fixed asset investment growth of around 26% level, we believe that one reason for investing resources rebound integrated step by step, increased investment; second increase in coal chemical inputs; third upgrade of existing mines. Gradually rising coal prices, the coal companies have also increased security investment, Western Hills, cows have increased security costs of extraction, we determine the real contribution to the rebound in fixed asset investment is still very small part of the production, but also contribute to yield take time. Investment in fixed assets amount to guarantee the basic output of raw coal per day of 8% growth rate, yield an annual increase of 2 million tons.
In recent years, China has been showing a continuous decline in coal exports, imports continued to rise. This year in March, China’s coal imports 2.75 million tons higher than exports, a net importer of coal. Coal imports in the first quarter, down 21.3% year on year to 11.26 million tons; exports fell 10.7% to 10.2 million tons. Total imports of 14.66 million tons from January to April, down 23.7%
; Total exports of 14.59 million tons, down 8%. The decline in imports continued high international coal prices, the price has been maintained at the Australian BJ 125 U.S. dollars / ton, and has recently broken through the 150 U.S. dollars. Japan and Australia thermal coal contract price 125 U.S. dollars / ton, the contract price of 55.65 U.S. dollars over the previous year rose 125%, coke prices break through 300 U.S. dollars is / t, while the China-Japan contract price was 131.4 U.S. dollars / ton over the previous year 67.9 U.S. dollars / ton , up 93.52 percent. Decline in exports was due to the impact of snow, the state export restriction because, on the other hand is due to relatively strong domestic demand. National Development and Reform Commission also issued the first batch of 2008 coal export quotas totaling 31.8 million tons, more than 42 million tons last year, announced the first batch of a 24% reduction. Quota of 70 million tons exported in 2007, but the actual exported 53.17 million tons only, on the other hand reflects the strong domestic demand, with strong domestic demand is expected to further reduce the amount of exports, increasing domestic supply, but less impact on domestic supply, in 2007 exports accounted for only 2.1% of domestic coal production, but a greater impact on the Asia Pacific market, in 2007 the Asia Pacific market were 521 million tons exported, accounting for Asia-Pacific market to 10% of coal exports.
Coking coal in recent years, new capacity is limited, increased the yield by about 3%, while the lower reaches of the main coke industry output growth was above 13%, resulting in tension not only on the downstream coking coal demand, the closure of small coal mines and the transport capacity constraints are the reason. Half of the country’s coking coal production capacity is provided by the small coal mines, while the main coke base in Shanxi Linfen area Luliang and small coal mines, to Linfen, for example, produce only 3 million tons more than mine, producing annually about 300,000 tons less coal Coal accounts for about 70% of the total, the city is not an annual production of 200 tons or more mines, due to security factors Linfen 90 million tons of production capacity in 2007 produced only 4,000 tons, has greatly affected the supply of coking coal, coke continuous price increase is a good example, we believe that sub-industry cycles coke can be extended to 2010.
Integrated areas above factors, we determine the supply of small coal mines resume production on the limited impact of changes in import and export a certain extent, can regulate the supply of domestic coal, but its impact is limited, this increase in output supply can keep above 8%, but tight supply of coking coal, 5.12 earthquake in Sichuan occurred in the short term coal supply to the Sichuan region will have some impact, but little effect on the country’s total production output of Sichuan, about 3%.
Requirements:
07 major coal consumption of coal industry, its growth rate lower than 10%, and the snow disaster of the first quarter of the downstream industry growth has slowed, but March gradually returned to normal after the growth level, we expect the electricity industry, the major coal consumption and metallurgical industry’s growth this year will be at 12%, 07 thermal 2721830000000 10 million, if the growth rate of 12%, thermal power demand increase will be 1.7 million tons, power industry growth rate directly determines the growth rate of coal consumption . Now relatively cheaper and more cost-effective electric power industry needs to promote faster downstream, is not conducive to the implementation of energy conservation; 2007 production of 469 million tons of pig iron, but also by the growth rate of 12%, then increments are 50 million tons of steel industry is about, the needs still very strong.
In the second half as the Shenhua coal liquefaction a 1 million tons / year of production, oil prices climbing, the new coal chemical industry investment and demand will set off an upsurge of methanol price is 4750 yuan / ton, prices rose more than 60% in 2007, DME price 6,700 yuan / ton, up 35% compared with 2007, it launched for the coal chemical industry has left huge margins. 2010, 2015, 2020, the scale of China’s coal to oil will be developed to produce 1.5 million tons, 1000 tons, 30 million tons (2015 and 2020, coal oil will account for the proportion of oil products were 4 % and 10%): Burning at the scale of the development of DME fuel to produce 5 million tons, 1200 tons, 20 million tons; scale development of coal to olefins to produce 1.4 million tons, 500 tons, 8,000,000 tons (about 3% of total olefin, 9%, 11%); the scale of the development of coal methanol to produce 16 million tons, 38 million tons, 60 million tons by 2020, coal will account for the production of methanol 94% of the total amount of methanol. Dimethyl ether (conversion ratio of 1.5:1) and olefin (conversion ratio of 2.92:1) are changed by the methanol from this calculation Taken together, the 2010, 2015, 2020, requiring a total of 11.7 million tons of methanol, 3300 tons, 54 million tons. Therefore, the future demand for coal chemical industry will accelerate growth.
So the future will show a tight supply-demand balance in general the trend, especially in metallurgical coal, the summer rush to transport coal and to ensure the Olympics are more likely to exacerbate the situation.
3. Coal prices will continue to rise
In addition to raw material prices as well as future prices of resources outside the policy increases the cost of tax reform from the resources and the promotion of a gold and two charges, while the CPI year high for the control of the government’s target of 4.8% this year, the likelihood of implementation Great. China’s future reform of the content is a major resource of the pricing mechanism, straighten out the coal power relations is one important part of a continual rise in coal prices this year has far exceeded the initial rate increase coal linkage set, power companies have most of the losses, particularly those who market high proportion of coal power companies, such as the electricity price adjustment can not be successful, coal prices will be checked, although coal prices have been gradually the market, but the coal price is also largely influenced by the Government, particularly steam coal. Recently, Shandong and other provinces, introduced a coal price intervention measures, but only to stabilize prices, we recently communicated with most of the enterprises that can not in full swing, we think the price intervention affecting only large coal enterprise groups contract prices, these profits are affected, while the price of small coal mines hard intervention may lead to more small coal mines in the pursuit of profit impulse, Li Xiaopeng to Shanxi appointment, may be a sign of national policies introduced.
In 2008, the Datong-Qinhuangdao railway line capacity had only increased the capacity of other transport routes are saturated. Datong-Qinhuangdao line can transport about 50 million increase, but the central and southern Shanxi basically did not increase transport capacity, resulting in capacity remains tight in some areas, the railway fixed assets investment lags behind coal investment, and investment in port terminals should be backed and coordinated development.
This year’s coal prices are not presenting a short off-season situation, to further expand domestic and international coal price difference, BJ hit the price is 140 U.S. dollars / ton of high prices, the current spread in the 30 U.S. dollars / ton, Qinhuangdao Datong excellent mix from the end of last year 550 yuan / ton up to the present 800 yuan / ton, or 45% in May to increase the monthly 100 yuan / ton; coking coal market price has reached 1,800 yuan / ton, or has doubled three coking coal in east China price increases, the contract price has been to 1,500 yuan / ton. We believe that the overall tight supply and demand balance will maintain the price of coal enterprises are in a seller’s right to speak policy will therefore shift to lower cost; changes in the international economic environment supporting high price of coal to run; coal price formation mechanism is being made in the transition, full cost Accounts will be re-price elements of coal, coal prices will be fully market-oriented; the second half of the coal prices will continue to strength, coke is expected to continue to record high, hard coal contract prices have eased more for coking coal security opportunities.
Countries have been promoting energy conservation and coal as an input factor, the price really reflect the cost to affect demand, can really promote energy conservation and emission reduction can only be appropriate if the effect of suppressing the price of their anti. Oil prices affect the price of coal as a factor, but not a major factor, if oil prices pullback, the price of coal is not much room for correction.
4. Investment Strategy
A relative valuation of coal blocks
Unit has not cheap, but look at the relative valuation of the international market is not high, the international coal valuation is also about 30 times, but we can give the domestic coal with high valuation for the following reasons:
Demand: China’s sustained rapid growth
Steady growth in demand for downstream industries
Status: strategic position to improve gradually. Countries in the world are seeking control of resources, for energy security.
Integration: the industry concentration gradually increased. Concentration of large state-owned mines will be increasingly high number of small coal mines to 10,000 pressure, reduced production by 10 million tons 700 million tons less than the proportion of medium and small coal production adjusted to 56:17:27.
Resources: compensation for the use of advance to higher and higher barriers to entry. Increase barriers to entry will prevent the “tragedy of the commons” from occurring, reduce the free-rider phenomenon. Reading.
Growth: growth in coal output was higher than the international average.
Concept: moving away from the understanding of low price-earnings ratio
Green energy. Resource products people come to realize their value, over time, resources will become increasingly expensive, and coal is also in transition to green energy.
Investment Strategy 1: Resource integration of assets into the expected result
Small coal mines yield more volatile, more determined after snow control of national resources committed.
Group resources in Shanxi Province in order to integrate the five major subject, with the Coal, coke Group Integration forthcoming.
Form 6 to 8 hundred million ton and 8 to 10 50 million tons of large coal enterprise group level, the output accounting for more than 50%.
13 large coal bases, 98 mines, 2010
In large-scale coal production bases to reach 2.24 billion tons, accounting for 86%.
This year there will be substantial progress into the assets, resources and integration of assets into the most Shanxi Aspect.
Investment strategy 2: the full enjoyment of revenue the company prices
Tight supply of coking coal, coke prices are expected to continue to record high, coke sub-sectors will dominate the sub-sectors.
The rise in coking coal will also lead PCI coal prices.
Difficult to raise short-term coal contract prices, the high proportion of coal on the market, the company should be given to attention.
The background of high oil prices, the new coal chemical industry will be sought after market focus, coal chemical industry
Xishan Coal and Electricity
The current market price in Shanxi Coking Coal has more than 1800 yuan / ton, the contract price of coking coal in east China around 1,500 yuan, while the international coking coal contract prices in 300 U.S. dollars / ton, while the Western Hills contract price is currently only around 1,100 yuan, a huge difference to mention Western Hills Price gave birth to the opportunity, starting from June 1 Shanxi coke prices rose 200 yuan, following last month after another month, up 300 yuan / ton for coking coal prices to stay in space, while coking coal from the current market view of the sustained tension With the Olympics approaching, this could increase.
Static analysis, we forecast coking coal prices rose 200 yuan / ton, price adjustment counting from July 1, the income increased by about 560 million, net profit increase of 4.2 million, earnings per share increase of 0.35 yuan. 2008 price of 550 yuan integrated coal / ton, up 36% over the previous year, net profit rose 119%.
Xishan Coal and Electricity Power (000 983
) The investment value of one’s economy from the coke, the other from the assets into the expectations and gradual Xingxian mining production. Shanxi is currently promoting the integration of resources, integrated program will be introduced Coking Coal, Coking Coal Group’s assets, assumed office as the new chairman will be a gradual manner. With the harsh tile opening of the railway, Xingxian mine production capacity will gradually release. We raised the company’s 2008 profit forecast upwards to 2008 earnings per share of 1.91 yuan, 2.6 yuan in 2009, growth rate of 37%, the corresponding dynamic PE, 08 of the 27 times, 20 times in 2009, maintained buy rating.
Yanzhou
In 2008 the export of coal to be entered into the contract is 50 million tonnes, exports of coal contracts in 2007 fell by 50,000 tons or 9.1%; the average contract price of 151.67 U.S. dollars / ton, compared with 2007 exports of coal contract prices have increased an average of 72.70 U.S. dollars / tons or 92.1%.
And Huadian Power International (600 027
) Contract volume of 730 million tonnes, an increase of 250 in 2007
Tons, or 52.1%. Huadian Power International was mainly due to increased generating units, coal increased; contract net price of 470.15
Yuan / ton, the contract amount of variables to consider the effect of more than 2007
Annual increase of 129.12
Yuan / ton, or 37.9%. With pre-signed by 9.51 million tons, 16.81 million tons of coal contracts, the other is the intention of coal, the price will change with market changes, the annual sales plan in 3440 about 31.6 million tons the company headquarters.
Shanxi able to turn 100,000 tons of methanol, 600,000 tons of methanol and Yulin will be put into operation in 2008, Zhao F, pre-production mine in the fourth quarter, the sustainable future growth.
Shanxi Securities
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