China Shenhua (601088): Interim report performance is slightly higher than expected

Event summary: The company released its semi-annual report on August 24, 2019, reporting that the two companies realized operating income of 1163.

650,000 yuan, at least -8.

6%; net profit attributable to mother 242.

43 trillion, +5 for ten years.

5%; net profit after deduction is 226.

820,000 yuan, at least -1.

5%, budget benefit 1.

219 yuan, +5 throughout the year.


The company’s main business is in line with expectations as a whole: the coal cost is slightly lower than expected, the electricity prices of power plants in the table are slightly higher than expected, and the profit of power plants outside the table exceeds expectations.

(1) The volume and price of the coal sector are in line with expectations, and the cost of outsourced / self-produced coal fell slightly more than expected: in the first half of 2019, revenue from the replacement segment was 93.6 billion (63%), and operating profit was 19.3 billion (55%)%,厦门夜网 A year -11%), mainly due to falling coal prices and rising transportation costs.

Coal production in the first half of 20191.

4.5 billion tons, basically flat (ten years-0.

3%), sales volume 2.

17 billion tons, with a slight contraction (at least -3.

6%); ton of coal purity of 420 yuan / ton (two years -2.

8%), the Bohai Rim Index +0 during the same period.

6%, CCTD index -3.

2%, CCI index -9.

At 1%, the bargaining power of Shenhua Coal merged, and the market coal price was more stable earlier; the mining cost of self-produced coal per ton of coal was 111 yuan / ton (twice).

2%), the cost of outsourced coal per ton of coal is 321 yuan / ton (8% for many years), and the decrease in the cost of outsourced / self-produced coal is higher than expected. The decrease in the cost of self-produced coal is mainly due to the provision but unused maintenance.Safety costs are reduced every year, and some production equipment is fully depreciated.

(2) The volume and cost of the power sector are basically in line with expectations. The growth in electricity prices is slightly higher than expected. The performance of the power plants is not up to expectations. In the first half of 2019, the revenue of the former segment was 26.2 billion (18%) and the operating profit was 47 billion.(13%, -13% per year), mainly due to the decline in electricity sales.

In the first half of 2019, electricity generation was 77.9 billion kWh (one year -40%), and electricity sales were 75 billion kWh (ten years -40%), mainly due to the fact that half of the installed capacity and Guodian Power established a joint venture company at the end of January 2019;The electricity price is 0.

33 yuan / degree (in the past +5.

8%), the electricity price rose slightly more than expected, or because the average electricity price of the unit on the table is higher than that of the earlier unit;

199 yuan / degree (ten years-0.

3%), the unit cost of electricity sales is 0.

259 yuan / degree (in the past +0.

7%), basically unchanged.

The performance of off-balance sheet power plants did not meet expectations, and Beijing Guodian’s net profit in the first half of the year was only 4.

140,000 yuan (According to the Shenhua Interim Report, the performance is financial data for the five-month period from February 1, 2019 to June 30, 2019, of which China Shenhua’s distribution ratio to Beijing Guodian is 42.

53%), the profitability is far lower than the power plants on the table.

(3) The volume, price, and cost of the transportation sector basically met expectations: segment revenue before the recovery in the first half of 2019 was 24.7 billion (17%), and operating profit was 10.9 billion (31%, cumulative + 1%), Mainly due to a slight increase in railway traffic.

In the first half of 2019, the turnover of its own railways was 142.9 billion ton-kilometres (several decades + 3%), maintaining a steady growth; the tonnage-kiln revenue was zero.

141 yuan (in the past + 2%), the cost per ton-km (estimated value) is 0.

053 yuan (ten years + 1%).

Quantity of coal in own port1.
1.3 billion tons (previously -2%); 0 freight shipments.
5.5 billion tons (previously + 6%).

The net profit attributable to mothers was slightly higher than expected: the gross profit was -6 in ten years.

3%, net profit attributable to mother +5.

5%, mainly due to the decline in period expenses / income, investment income (non-recurring) growth.

(1) The investment income is mainly non-recurring: Of the 1.9 billion investment income in the first half of 2019, 1.1 billion came from the non-recurring gains and losses formed when the joint venture was established, and 400 million came from the investment income from disposal of transactional financial assets. Equity method accountingLong-term equity investment is only 1.

900 million (2 in the same period last year.

700 million).

(2) Period expenses were slightly lower than expected: the total expenses for the three expenses (including R & D) in the first half of 2019 were 10.1 billion yuan, -13% per year, and the period expenses per ton of coal sales were 46.

4 yuan / ton.

(3) Income tax expenses are slightly lower than expected: 21% of total profits.

7% (18H1 is 23).

6%), or the increase in the proportion of profits in the transportation sector due to lower income tax rates; (4) the replacement of free cash flow in the second quarter of a single quarter, but mainly caused by countermeasures, is still reasonably feasible: mainly due to accounts and bills payableReduction / payment of statutory taxes and fees / payment of employees’ salaries / part of the factory bills etc. is still a reasonable scale.

Investment suggestion: Raise 2019/20 profit forecast and maintain 26.

Target price of 08 yuan / share, re-buy rating.

As the non-recurring profit / loss / electricity price is slightly higher than expected, we raise the EPS forecast for 2019-21 to 2.

17 yuan / 2.

13 yuan / 2.

15 yuan (the original forecast of EPS for 2019-21 was 2 for the first coverage).

16 yuan / 2.

12 yuan / 2.

15 yuan), but because the original target price is based on 2021 performance (expected forecast unchanged) to 12 times PE, so maintained at 26.

The target price of 08 yuan and “Buy” rating remain unchanged.

Risk reminders: Macroeconomic fluctuations exceed expectations, changes in energy import policies, non-coal energy developments exceed expectations, and the impact of group integration on corporate governance.