Jinwu Financial News | According to First Shanghai Research and Development, China's Shenhua (01088) achieved revenue of 168.1 billion yuan in the first half of 2024, a year-on-year decrease of 0.8%; net profit to mother was 32.8 billion yuan, a year-on-year decrease of 11.1%. The net operating cash inflow was 52.7 billion yuan, up 13.6% year on year; of these, revenue for the second quarter was 80.4 billion yuan, down 2.4% year on year, and realized net profit to mother of 15 billion yuan, down 7.2% year on year.

According to the bank, the company's coal business achieved output of 0.163 billion tons in the first half of the year, up 1.6% year on year; sales volume reached 0.23 billion tons, up 5.4% year on year; of these, the coal business achieved revenue of 134.3 billion yuan, down 0.7% year on year; due to falling coal prices, the company's profit before tax fell 17.2% year on year in the first half of the year. Due to rising labor costs in the first half of the year, the company's production cost per unit of coal production was 172 yuan/ton, an increase of 3.2% over the previous year. Looking at the coal sales structure, the company's share of mid-term cooperation reached 86% in the first half of the year, which is basically the same as the same period last year. The average annual sales price of Changxie in the first half of the year fell by only 2% year on year. The price fluctuation was far less than the market spot price, so that the company was able to stabilize profits during the coal price pressure test in the first half of the year.

The bank continued that the company's power generation sector achieved revenue of 44.4 billion yuan in the first half of the year, an increase of 0.4% year on year; profit before tax fell 8.9% year on year. Affected by the recovery of hydropower in the first half of the year, the number of hours used by the company's thermal power decreased by 6.2%. Coupled with the 3.3% year-on-year decrease in electricity sales prices in the first half of the year, the gross margin of the company's power generation business fell 0.7 pct. The company's integrated operation model of coal+transportation+power generation has greatly smoothed the impact of the cycle on profits. As new installations continue to be put into operation, the company's electricity sales business is expected to maintain a stable profit scale for a long time.

The bank said that looking ahead to the whole year, the company's advantages in integrated industrial operation will continue to be reflected. The sales structure of Gaochang Coking coal stabilizes profit levels, and the power generation and transportation business cope with cycle fluctuations. The impact of falling coal prices gradually fades in the second half of the year as thermal power resumes, and the inclusion of central enterprise market value management in the assessment will help boost the company's valuation. Considering the current level of coal prices and electricity prices, the 2024-2026 net profit forecast was adjusted to 60.9/61.4/61.9 billion yuan, giving a target price of HK$40.45, corresponding to 12 times PE in 2024. There is room for 19% increase compared to the current price, and the purchase rating is maintained.