The Zhitong Finance App learned that Guojin Securities released a research report saying that the Q4 coal price increase is expected to drive continued performance improvement. In a low interest rate environment, increased profit stability will also provide a foundation for declining dividend rate requirements and valuation restoration. Main line 1: Thermal coal leaders have steady profits and high dividend values. Main line 2: A flexible target benefiting from rising coal prices. Main line 3: Integration of coal and electricity as electricity prices rise.
Guojin Securities's main views are as follows:
Sector Overview: Profit recovery in the main business, significant sector growth, and fund allocation rebounded
(1) In terms of performance, the 26Q3 coal sector's net profit to mother was 39.3 billion yuan, +19.8% compared to the same period, and after deducting non-net profit of 39.8 billion yuan, +32.3% and +5.9% from the same period last month. The decline in return to mother was mainly affected by the higher non-revenue base in Q2. 26Q1-3 operating cash flow was +32.9% year-on-year. The rate for the period decreased, the balance ratio increased slightly compared to the end of the previous year, and ROE recovered moderately. (2) On the business side, production and sales of coal companies were under pressure under 26Q3 safety supervision, and the gross profit of tons of coal was quite obvious. The increase in sales prices led to a significant restoration of gross profit per ton of coal. The gross profit per ton of sector sales was +27.0% month-on-month. Among them, thermal coal and coking coal were +26.4% and 34.6% respectively, but volume reduction and cost increases offset some of the profits. (3) In terms of market conditions, the coal sector rose 15.2% year to date, ranking first in the industry. Q3 rose 22.0%, thermal coal and coking coal rose 22.8% and 15.3% respectively; the PE/PB sector was 15.61/1.70, and the ten-year quantile was 85.69%/93.08%, which is still at a high level in history. Considering the month-on-month rise in coal prices in Q4, profits are expected to continue to improve. Medium- to long-term supply compliance and normalization of safety restrictions are expected to raise the bottom of coal prices, reduce profit fluctuations, enhance profit and dividend sustainability, and support value revaluation brought about by deepening dividend attributes. (4) In terms of holdings, the 26Q3 public coal allocation ratio rose to 1.01%, +0.59pct month-on-month, with supply constraints and rising coal prices driving up profit expectations. Among them, thermal coal and coking coal increased by 0.52 and 0.07pct respectively; during the same period, the market value share of the industry rose to 2.95%, still underallocated about 1.94 pct, insurance capital and active public equity selectively increased. Passive product holdings contracted with net redemption, accounting for 0.52% of current sector turnover.
Thermal coal: supply elasticity is limited, winter storage and heating demand support prices
Net profit of the 26Q3 thermal coal sector after deducting non-return to mother was 36.2 billion yuan, +22.7% year-on-year and +3.9% month-on-month. Since the beginning of the year, the Q5500 spot price in Qingang has risen from 679 yuan/ton to 1,013 yuan/ton, with a cumulative increase of 49.2%, of which the average price of 26Q3 was 878 yuan/ton, +7.4% month-on-month and +31.3% year-on-year; as of November 6, the average spot price of 26Q4 was 1,016 yuan/ton, +15.7% month-on-month, +32.8% year-on-year, and Changxie's average price was 722 yuan, +37 yuan year-on-year. On the supply side, the country's raw coal production in 26Q3 was -10.1%, -7.7%, and -6.8%, and the average daily output was -12.8%, +5.4%, and +10.0% month-on-month. Among them, the year-on-year decline in Shanxi continued to be above 30%, and 26Q3 thermal coal imports fell 6.0% year on year. The resumption of production has progressed further since October, but safety inspection, production continuity, and load recovery have limited actual increases, and with the start of production assessment and inspection in mid-November, it may be difficult for the domestic supply side to release large quantities, and imported coal supplementation is limited. On the demand side, cooling and heating in the north led to a recovery in daily consumption, and thermal power generation is expected to grow at a low base in November-December. Power plant inventories in 25 provinces were 6.5% lower year over year, and the inland was 12.1% lower, so there is still room to free up demand for storage. Improved supply expectations and prudent procurement at the end of October led to a steady recovery in coal prices in the first week of November. Limited supply flexibility compounded demand for winter storage, and there is still room for coal prices to rise.
Coking coal: supply constraints support coal prices, weakening demand suppresses growth
The net profit of the 26Q3 coking coal sector withheld from non-return mother was 3.6 billion yuan, +476.6% year over year and +31.6% month over month. Since the beginning of the year, the price of coking coal produced in Jingtang Port and Shanxi has risen from 1,650 yuan/ton to 2,420 yuan/ton, with a cumulative increase of 46.7%, of which the average price of 26Q3 was 2,402 yuan/ton, +30.6% month-on-month and +54.8% year-on-year; as of November 6, the average spot price for 26Q4 was 2,488 yuan/ton, +3.6% month-on-month and +44.8% year-on-year. The Changxie Index remained flat in November after increasing by 50 yuan to 1,728 yuan in October. Since October, the increase in domestic production has been slow to be released, and Mongolian coal customs clearance has remained low, supporting the price of high-quality coal. However, steel mill profits have been pressured, iron water has declined, and the decline in coke has further squeezed the profits of coking companies. Downstream procurement has been cautious, and coal prices have been adjusted at a high level. The subsequent resumption of domestic production and the expected increase in customs clearance in Ganqimaodu suppressed upward space, while slow actual recovery and low inventories in the industrial chain limited the scope of the pullback. The short-term forecast is to continue to fluctuate and adjust. If coking steel profits stabilize and demand for stock replenishment is released, there is still room for recovery in coal prices.
Risk Alerts
The decline in coal prices exceeded expectations; downstream demand fell short of expectations; downstream demand fell short of expectations.