Event： The company released its revised earnings forecast today and issued an announcement regarding its controlling shareholders of receiving the "Approval of establishing Jizhong Energy Group Ltd. by Hebei people’s government”. Comment: The company released its revised earnings forecast today that according to preliminary estimate by company’s financial department, the net profit in the 1st half of 08 increases by 150% -200% compared to the same period last year and witness a substantial increase of 50% -100% compared to the forecast delivered on April 18th. The rising coal price is the main reason for companies to revise their earnings growth. According to the announcement, the company’s clean coal price has been rising three times in a row since January 1, 2008. Since June 1, the company 1 / 3 coke coal tax-inclusive price rose again from 1473 yuan / ton of May 1 to 1,620 yuan / ton. Rising prices in June will again significantly improve company performance. According to coal sales prices in June, the price has risen 786 yuan / ton or as high as 121 percent from 2007 average selling price of 648 yuan / ton. We believe that the substantial rise of coking coal prices can be attributed to the following three aspects. Firstly, because of the controlled production in small coal mines and limited additional capacity of those leading coking coal companies represented by the company, supply and demand of coking coal become tenser, which offers great momentum for rising prices. Secondly, strong pricing ability on the strength of scale advantage and regional advantage. Thirdly, the boom of downstream steel industry. We believe that in the next period, the coal industry will be still in an up cycle. This is mainly because with capacity of small coal mines reaching its peak, it is difficult for domestic coal mines to meet the future demand, which has been evidenced by the rising coal prices since 08. But coking coal industry, which has the highest level of marketization, will benefit most from the bright prospect of the industry due to slim chances of price limits by the government. The company will see coal capacity edging up in the next future years mainly in the following three aspects: (1) Coal mining technical upgrading of Dongpang with its annual coal capacity of 450,000 tons. It is expected to be completed in July, 2007 and reach designed capacity in 2008. (2) Coal mines of Shanxi Shouyang, of which a 40% stake is held by the company, have a recoverable reserve of 160 million tons and production of 900,000 tons. The output is expected to increase to 1.8 million tons in 2008. (3) Coal mines of Shanxi Tiantai, of which 80% shares are held by the company, have a recoverable reserve of 130 million tons and production of 300,000 tons in 2006. Currently, the company is upgrading its mining technique to increase its output to 1.5 million tons/y. And it is expected to be increased to 3 million tons in the future. Viewed from the overall situation, with gradual input of investment projects, coal production of the company will register a steady growth in the next few years. By 2010, the production capacity of coal is expected to reach 15 million tons/y. Meanwhile, the company has received the announcement regarding its controlling shareholders receiving the "Approval of establishing Jizhong Energy Group ltd. by Hebei people’s government”, which indicates that the application of alliance between Hebei Jinniu Energy Group and Fengfeng Group has been approved by Heibei people’s government. After the reorganization of Jinniu Group and Fengfeng Group, the total production capacity will reach over 40 million tons. At present, the production capacity of the company is only 12 million tons, which means there is still a big room for future coal assets injection. Based on coal price hike this time, not considering assets injection, we upgrade company 2008-2010 EPS to 1.85 yuan, 2.34 yuan and 2.94 yuan respectively. Based on the closing price of 44.21 yuan on 18th, June, the current share price is equivalent to 18.9× 2009EPS, at the average level of the industry. Considering the potential of future coal assets injection, we give it six-month target price of 51.55 yuan and upgrade to BUY rating. 相关研究报告下载: [attach]4737[/attach]
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发表于 2008-6-21 11:11
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