1、Asia China Resources 16 August 2010 China Coal Energy Reuters: 1898.HK Bloomberg: 1898 HK Exchange: HKG Ticker: 1898 Making progress in 1H10 Fred Lam, CFA Research Analyst (+852) 2203 6164 Nora Min Research Associate (+852) 2203 6130 Getting back on growth path China Coals 1H10 performance affirme
2、d it is back on a growth path after two years of relatively lower production growth. In our view, growth should return to the mid-to-high double digits in 2010-11, and we see growth upside as it has a number of projects on hand and the parent company added 20mtpa of production from the Shanxi small
3、mines consolidation. We maintain Buy as we see upside to valuation and the shares are trading at 10x 2011 P/E with c.20% earnings growth. Forecasts and ratios Year End Dec 31 2008A 2009A 2010E 2011E 2012ESales (CNYm) 51,753.1 53,187.0 70,598.7 87,626.4 102,538.6EBIT(CNYm) 10,698 9,604 13,788 17,141
4、20,601Reported NPAT (CNYm) 7,131.0 7,834.3 9,958.8 12,445.7 14,849.0DB EPS growth (%) 70.6 -9.1 27.1 25.0 19.3DB EPS FD(CNY) 0.65 0.59 0.75 0.94 1.12OLD DB EPS FD(CNY) 0.65 0.59 0.74 0.92 1.10% Change 0.0% 0.0% 2.0% 2.1% 1.9%PER (x) 17.6 13.8 12.2 9.8 8.2EV/EBITDA (x) 10.4 7.6 6.9 5.7 4.7Yield (net)
5、 (%) 1.3 1.8 2.0 2.6 3.0Source: Deutsche Bank estimates, company data 1DB EPS is fully diluted and excludes non-recurring items 2Multiples and yields calculations use average historical prices for past years and spot prices for current and future years, except P/B which uses the year end close Deuts
6、che Bank AG/Hong Kong All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche Bank does and seeks to do bus
7、iness with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANA
8、LYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 007/05/2010 Forecast Change Buy Price at 13 Aug 2010 (HKD) 10.50Price target - 12mth (HKD) 13.5052-week range (HKD) 15.92 - 9.45HANG SENG INDEX 21,072Key changes Price target 13.10 to 13.50 3.1%Sales (FYE) 63,335 to 70,599 11.5%Op prof margin (F
9、YE) 20.1 to 19.5 -2.7%Net profit (FYE) 9,761.6 to 9,958.8 2.0%Price/price relative 0481216208/0811/082/095/098/0911/092/105/10China Coal EnergyHANG SENG INDEX (Rebased) Performance (%) 1m 3m 12mAbsolute 2.9 -8.4 -1.9HANG SENG INDEX 3.1 3.2 1.0Stock data Market cap (HKDm) 139,216Market cap (USDm) 17,
10、913Shares outstanding (m) 13,258.7Major shareholders China Coal Group (57.5%)Free float(%) 42Avg daily value traded (USDm) 40.2Key indicators (FY1) ROE (%) 14.7Net debt/equity (%) -14.6Book value/share (CNY) 5.41Price/book (x) 1.7Net interest cover (x) Operating profit margin (%) 19.5Company Global
11、Markets Research Strong production growth in 1H10 with robust pipeline Coal production in 1H10 indicated that full-year 2010 growth may be robust. Even if production in 2H10 is flat, 2010 growth will hit 15%. We are looking for 17% in 2010 and 14% in 2011, and we only include the start of Pingshuo E
12、ast open-pit and upgrades at existing mines. The 20mt Pingshuo East is making steady progress and it should add 10mt of new production per year in 2011-12. Further production upside exists from a number of projects on hand, including construction of Xiaohuigou, Nanlin River, and Muduchaideng coal mi
13、nes. 1H10 highlights: more spot and third-party coal sales; overall ASP up 12% China Coal increased the proportion of spot sales from 27% of domestic sales in 2009 to 30% in 1H10. However, it continued the trend of increasing third-party (proprietary trading) coal, with third-party coal sales up fro
14、m 7% of total coal sales in 1H09 and 16% in 2009 to 19% in 1H10. The overall impact is a small reduction to gross margin. Contract coal ASP increased only 2% yoy but spot coal was 27%, and overall ASP was up 12%. Price target of HKD13.5 based on SOTP of coal, coking, machinery hence, much of 1H10 ha
15、d a low base. Organic growth came from Pingshuos Jindong, Dongpo, Shaqu and Nanliang. Raw-to-commercial coal yield remained an issue in 1H10. The yield declined to 74% in 1H10 from 75% in 1H09 (2009: 78% in 2009). ASP was up 12% yoy in 1H10. Contract coal ASP rose by only 2% (Rmb423/t). We continue
16、to assume full-year ASP of Rmb425/t based on the announced contract price hike of 5.6% (from Rmb540/t to Rmb570/t for 5500kcal grade). Apart from domestic contract coal, other segments showed satisfactory price increase, including domestic spot (+27%) and coking coal (+48%). Proprietary (third-party
17、) coal ASP was flat, but third-party coal is principally a margin business. Gross margin declined from 34% in 1H09 to 30% in 1H10 due to product shift mix. On the positive side, spot sales increased from 27% of domestic sales in 2009 to 30% in 1H10. On the negative side, third-party (proprietary tra
18、ding) coal continued to increase. Third-party coal sales rose from 7% of total coal sales in 1H09 and 16% in 2009 to 19% in 1H10. Coking coal sales were also weak. Coking coal sales tonnage was down 10% yoy in 1H10 despite a doubling of production at Shaqu, China Coals main coking coal mine. Figure
19、2: Coal segment key data 1H09 1H10 YoYCoal operation production (mt) 41 59 44%Self produced commercial coal (mt) 37 46 26%Thermal coal (mt) 36 46 26%Coking coal (mt) 1 1 -10%Coal trading (mt) 4 13 197%Overall ASP (Rmb/t) 419 470 12%Self produced commercial coal 423 449 10%Thermal coal 416 454 9%Dome
20、stic 414 451 9%Contract 415 423 2%Spot 403 513 27%Export 533 638 20%Coking coal 874 1,293 48%Cost (Rmb/t; cash cost plus depreciation) 180 198 9%Cost plus transportation cost (Rmb/t) 266 289 9%Source: Deutsche Bank, Company data 1H10 production: +27% yoy But raw-to-commercial yield remained an issue
21、 Weaker gross margin on more third-party coal sales and lower coking coal sales Higher spot sale is a bright spot 16 August 2010 Resources China Coal Energy Page 6 Deutsche Bank AG/Hong Kong Figure 3: Self-produced commercial coal Figure 4: Unit cost of self-produced commercial coal 83.391.5100.862.
22、368.974.179.046.2-20.040.060.080.0100.0120.02007 2008 2009A 1H10mntonsRaw coal Commeric al coal 98.8363.5172.9665.0424.2230.8128.1530.4213.5115.9318.2621.997.907.686.126.0659.6961.9373.3874.79-501001502002502008 1H09 2009 1H10Rmb/tOthersMaintenanceDepreciationStaffRaw materials198.87179.86204.15198.
23、30Source: Deutsche Bank, Company data Source: Deutsche Bank, Company data Coal segment cost: manageable Production cost was up Rmb19/t in 1H10 from 1H09 (10% yoy; Figure 4). Including transportation cost, total unit production cost was up 9%. The cost increase was partially driven by higher mine str
24、ipping expense (Rmb3/ton) and other production costs, such as diesel, consumables, environmental restoration expenses, and resource compensation charges (Rmb12/ton). While the cost increase was in line with expectations and guidance, it was nevertheless impressive given that the industry has noted s
25、trong cost pressure so far in 2010. Machinery segment continues to perform The machinery segment continued to perform, with revenue and gross up 19% and 28% respectively. This business benefits from favorable industry fundamentals with the increasing mechanization of the coal mining industry. Heilon
26、gjiang 250ktpa project commenced production China Coals 250ktpa Heilongjiang production started production in 1H10. The plant produced 77kt of methanol in 1H10, suggesting an annual utilization rate of 62%. While we dont know the profitability of the plant, the 62% utilization rate is acceptable. In
27、dustry trend: spot price trend remains uncertain The spot market has fallen recently as demand weakened due to hydro power output and the slowdown in industrial production (Figure 5). Sentiment on the spot market was also affected by NDRCs instruction to coal miners to stick with the contract price
28、and to maintain a stable coal price (Please refer to “NDRC instruct coal miners to stick with annual contract,” dated 25 June 2010, for details). Inventory has stayed at an elevated level, as IPPs have stocked up ahead of the summer peak season and consumption has been weaker than expected (Figure 6
29、). 16 August 2010 Resources China Coal Energy Deutsche Bank AG/Hong Kong Page 7 Figure 5: Spot coal price (Qinhuangdao 5,500kcal) Figure 6: Nationwide coal inventory days Shanxi (5500 K)4505506507508509501,050Jan-08Mar-08May-08Jul-08Sep-08Nov-08Jan-09Mar-09May-09Jul-09Sep-09Nov-09Jan-10Mar-10May-10J
30、ul-10Rmb/tShanxi (5500 K)4812162024May-09Jun-09Jul-09Aug-09Sep-09Oct-09Nov-09Dec-09Jan-10Feb-10Mar-10Apr-10May-10May-10Jun-10InventorydaysNationalSource: Wind, Deutsche Bank Source: SX Coal, Deutsche Bank Revision to forecast and target price We have raised our forecast by 2% for 2010-12 (Figure 7).
31、 The revisions estimates are driven by a combination of: Increased production to reflect 1H10 production. Decreased raw-to-commercial coal yield from 78% to 77% for 2010. Increased spot sales mix from 29% to 30% of domestic coal sales. Increased proprietary trading (third-party) coal sales. Reduced
32、coking coal sales volume. Increased overall ASP. Figure 7: China Coal: Key changes to our earnings forecasts 2010E 2011E 2012E(Rmb m) Old New Chg. Old New Chg. Old New Chg.Revenue 63,335 70,599 11% 78,915 87,626 11% 93,265 102,539 10%Gross profit 16,103 17,345 8% 20,917 21,731 4% 25,107 25,972 3%Coa
33、l 14,123 15,411 9% 18,130 19,163 6% 21,358 22,506 5%Coking 218 223 2% 270 274 2% 327 333 2%Mining equipment 1,478 1,453 -2% 2,135 1,921 -10% 2,882 2,594 -10%Others 283 257 -9% 382 373 -2% 540 540 0%SG as a result, the recommendations may differ and the price targets and estimates of each may vary wi
34、dely. Deutsche Bank has instituted a new policy whereby analysts may choose not to set or maintain a target price of certain issuers under coverage with a Hold rating. In particular, this will typically occur for “Hold“ rated stocks having a market cap smaller than most other companies in its sector
35、 or region. We believe that such policy will allow us to make best use of our resources. Please visit our website at http:/ to determine the target price of any stock. The financial instruments discussed in this report may not be suitable for all investors and investors must make their own informed
36、investment decisions. Stock transactions can lead to losses as a result of price fluctuations and other factors. If a financial instrument is denominated in a currency other than an investors currency, a change in exchange rates may adversely affect the investment. Past performance is not necessaril
37、y indicative of future results. Deutsche Bank may with respect to securities covered by this report, sell to or buy from customers on a principal basis, and consider this report in deciding to trade on a proprietary basis. Unless governing law provides otherwise, all transactions should be executed
38、through the Deutsche Bank entity in the investors home jurisdiction. In the U.S. this report is approved and/or distributed by Deutsche Bank Securities Inc., a member of the NYSE, the NASD, NFA and SIPC. In Germany this report is approved and/or communicated by Deutsche Bank AG Frankfurt authorized
39、by the BaFin. In the United Kingdom this report is approved and/or communicated by Deutsche Bank AG London, a member of the London Stock Exchange and regulated by the Financial Services Authority for the conduct of investment business in the UK and authorized by the BaFin. This report is distributed
40、 in Hong Kong by Deutsche Bank AG, Hong Kong Branch, in Korea by Deutsche Securities Korea Co. This report is distributed in Singapore by Deutsche Bank AG, Singapore Branch, and recipients in Singapore of this report are to contact Deutsche Bank AG, Singapore Branch in respect of any matters arising
41、 from, or in connection with, this report. Where this report is issued or promulgated in Singapore to a person who is not an accredited investor, expert investor or institutional investor (as defined in the applicable Singapore laws and regulations), Deutsche Bank AG, Singapore Branch accepts legal
42、responsibility to such person for the contents of this report. In Japan this report is approved and/or distributed by Deutsche Securities Inc. The information contained in this report does not constitute the provision of investment advice. In Australia, retail clients should obtain a copy of a Produ
43、ct Disclosure Statement (PDS) relating to any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the product. Deutsche Bank AG Johannesburg is incorporated in the Federal Republic of Germany (Branch Register Number in South Africa: 1
44、998/003298/10). Additional information relative to securities, other financial products or issuers discussed in this report is available upon request. This report may not be reproduced, distributed or published by any person for any purpose without Deutsche Banks prior written consent. Please cite source when quoting. Copyright 2010 Deutsche Bank AG
