Xishan Coal and Electricity (000983): Group Assets Restructuring Shanxi National Reform Accelerates Catalytic Transformation and Promotion
Company profile: There are synergistic advantages of coal and coke integration, and performance continues to grow.The company is a leading company in the coking coal industry. In the past 5 years, the coal + coke revenue accounted for more than 80% (50% coal and 30% coke), and it has the synergistic advantages of coal and coke integration.With the significant improvement in the supply and demand pattern of the coal industry, coal prices have increased year by year. The company’s performance has ushered in continuous growth since 2016, and the compound annual growth of revenue from 2016 to 2018 has reached 28.28%; the compound annual growth rate of net profit attributable to mothers reached 104%; the return on net assets and net interest rates also achieved multiple-level growth.In addition, the 49% equity of China Coal Huajin acquired by Shanxi Coking in Shanxi Coking in 2018 contributed to the company’s performance, resulting in the company’s continuous increase in investment income and further room for future growth. Coal business: large production capacity & high clean coal washing rate, leading in profitability industry.At present, the company’s total mine production capacity is 3260 income, and the equity ratio is 86%.In 2018, the decrease in the amount of gas produced on the slopes replaced the release of the completed amount and the restorative increase in the output of other mines. The company’s raw coal production and sales increased by 9 respectively.89% and 7.38%, Hongxing in the next two years, Dengfukang Mine is expected to start production one after another, and production and sales are expected to further increase.In terms of profitability, the company’s profit performance is high performance (mainly because the company’s clean coal washing rate is the first in the industry), indicators (stable coal seam deposits, simple 北京夜网 geological structure), and strong profitability (compared to the company’s first and major leading otherthe company).At the industry level, the price of coking coal has fluctuated slightly in the first quarter of 19 since the second half of 2018 surged. Looking ahead, two logical lines (1) downstream steel prices are expected to run at a high level due to factors such as the Brazilian mine disaster (2)The slow release and the environmental protection and production limitation of downstream coking enterprises are not as good as expected. The average support for coking coal prices has stabilized or even increased slightly. Coke business: production capacity meets environmental protection requirements, and profitability continues to increase.The company’s existing coke assets include Jingtang Coking and Xishan Coal Gasification, 北京桑拿洗浴保健 with a total capacity of 540 ingots.Although the two subsidiaries belong to the “2 + 26” key urban areas, since the coke production capacity in both regions meets environmental protection requirements, the coke production and sales volume in 2018 has also been significantly affected by environmental protection and production restrictions.Continuously improve the supply-side reforms, the supply and demand pattern of the coke industry is developing in a more healthy direction, and coke prices have also stabilized and rebounded.The environmental protection and production restriction started in 2017 has once again reshaped the coal-coke-steel industry chain, and the center of coke prices has continued to rise.Affected by rising coke prices, the profitability of both subsidiaries has significantly improved.In the future, the excess coke capacity will continue to be cleared, and the company’s coking business profitability has room for increase. Power business: Utilizing low & high coal prices, substantial reduction of losses is still the primary goal.At present, the company has put into operation 4.47 million kilowatts of installed power and 2 million kilowatts of installed power.By the end of May 2018, the Gujiao Phase III power plant had obtained the approval from the National Energy Administration for commissioning, and the company’s output circulation increased significantly in 201821.37% and 22.twenty two%.However, in terms of utilization hours, the utilization hours of the company’s generating units have always been lower than the national thermal power utilization hours.From 2017 to 2018, the company’s power business was interrupted for two consecutive years.One is the sharp increase in coal prices, which has led to a significant increase in power generation costs. The other is the benchmark coal price gains in Shanxi Province.Although the company’s power business achieved substantial loss reduction in 2018, it is still very large to reverse the losses to gains and losses. State-owned enterprise reform: The growth of the group’s asset volume and the expectation of an accelerated asset injection will quickly catalyze the forecast.Deepening the reform of state-owned enterprises since the Central Economic Work Conference in December 2018, especially the rapid mixed reforms have been intensive.On March 4, 2019, Shanxi Province issued documents one after another, and held the latest internal and internal group budget reforms proposed by the conference. The coal state-owned enterprises were relatively lagging behind. It is necessary to vigorously transform diversification and mixed ownership reform.Combined with the “listed company +” strategy proposed by Shanxi Province, we believe that asset securitization (overall listing and asset injection) will still be the primary means of Shanxi’s national reform.Shanxi Coking Coal Group Co., Ltd., the controlling shareholder of the company, is China’s largest and most comprehensive high-quality coking coal production enterprise and the main supplier of coking coal market.At present, although the group has three listed platforms (Xishan Coal, Shanxi Coking, Nanfeng Chemical), the asset securitization rate of the group in 2017 was only 27.At 28%, Xishan Coal Power, as the listed coal platform of the Group ‘s coal assets, has a coal production capacity of only 18% of the Group ‘s coal.74% and 26.54%, indicating that the Group’s external assets and liabilities have a lot of room for capital operation.Considering that Xishan Coal Power is expected to become the coal business integration platform of the Coking Coal Group in the future, the acceleration of the Group’s asset injection is expected to accelerate the improvement of the company’s performance. Investment strategy: “Buy” rating.We expect that the coal price will continue to be at a high level gradually in the future, the reform process of Shanxi state-owned enterprises will gradually accelerate, and the company’s future performance is expected to further improve.We estimate that the company’s EPS for 2019-2021 will be 0.64, 0.71, 0.77 yuan, the current sustainable corresponding PE is 9 respectively.5X / 8.6X / 8.0X, give the company a “Buy” rating. Risks: Economic growth is slower than expected; policy adjustments are too great; renewable energy alternatives.