Financial Union News on November 5th (reporter Liu Ke Wang Bin), from laying out hydrogen energy back to coal mine acquisitions, recently A-share coke giant Meijin Energy (000723.SZ) disclosed a major asset restructuring plan that attracted market attention.

It is worth noting that the three coal mines planned to be acquired by Shanxi Meijin Energy have proven reserves exceeding the company's existing coal mine reserves. Yao Jinlong responded, "Jinyuan Coal Mine, Zhengcheng Coal Industry, and Zhengwang Coal Industry are mainly in the coal industry, with the main products being coking coal or blend coal, which is a scarce coal type with wide applications and high market value in multiple industrial fields.

In recent years, Meijin Energy has been frequently focusing on the hydrogen energy track, but the company's vast majority of revenue still comes from the coal business.

Regarding hydrogen energy development, Yao Jinlong believes that the biggest pain point in the industry currently is the 'insufficient scenario development', but Meijin Energy's goal of building a national hydrogen supply network by 2030 remains unchanged.

Regarding the acquisition: After the three target coal mines reach production, they can achieve over 3 billion in profit each year.

Starting from transportation, later expanding into coal trading, coke production, Meijin Energy Group has become one of China's largest coke production enterprises, the largest commodity coke production enterprise nationwide.

According to the data, Shanxi Meijin Energy currently owns four major coal mines, namely Fenxi Taiyue, Dongyu Coal Industry, Jinfu Coal Industry, and Jinhui Coal Industry, with an approved annual production capacity of 6.3 million tons, coke production capacity of 10.95 million tons per year, and current production capacity of 8.95 million tons per year. In the first three quarters of this year, the company achieved revenue of 14.37 billion yuan, down 3.15% year-on-year, with a net loss of 0.655 billion yuan, turning into a loss year-on-year, but the loss is narrowing quarter by quarter.

On October 9, Shanxi Meijin Energy announced that the company will acquire 51% equity of Linxian Jinyuan Coal Mine Co., Ltd. (referred to as "Jinyuan Coal Mine"), 49% equity of Shanxi Fenxi Zhengwang Coal Industry Co., Ltd. (referred to as "Zhengwang Coal Industry"), and 49% equity of Shanxi Fenxi Zhengcheng Coal Industry Co., Ltd. (referred to as "Zhengcheng Coal Industry") through the issuance of shares. The main business of these three coal mines is coal mining and sales, consistent with Shanxi Meijin Energy's main coal business.

Regarding this transaction, Shanxi Meijin Energy stated that the purpose includes resolving industry competition issues and expanding the company's reserve advantages in scarce coking coal resources.

Yao Jinlong told Caixin reporters that the company had the idea of acquiring coal mines early this year and began discussing relevant plans in the first half of the year. Jinyuan Coal Mine, Zhengcheng Coal Industry, and Zhengwang Coal Industry's main business is coal mining and sales, positioned upstream in the integrated industry chain of coal-coking-gas-chemical-hydrogen of the listed company, with significant synergies with the listed company's main business.

"We expect that after all three coal mine assets reach full production, they will contribute substantial profits to the listed company each year; if all goes well, we expect these 3 coal mines to be injected next year. The mining permit of Jinyuan Coal Mine will be reapproved before we officially submit the restructuring materials; after the asset injection, we may also negotiate with the major shareholders of Zhengwang Coal Industry and Zhengcheng Coal Industry for share swaps. We hope that the future financial statements of these three coal mine assets can be consolidated." Yao Jinlong further stated, "Under the new regulatory environment, we must seize the opportunities for listed companies' mergers and restructurings, leverage our professional advantages, and promote listed companies to achieve resource integration, improved quality, and upgraded industries through mergers and acquisitions."

Regarding the reasons for the company's losses, Yao Jinlong pointed out that coal mine profits were lower than expected, coupled with a tough coking coal market, currently at a standstill. The coking coal business mainly involves large fixed asset investments and high depreciation, leading to less favorable financial statements. However, with the successful commissioning of the second phase of Guizhou Meijin's 'Coal-Coke-Hydrogen' integrated utilization demonstration project producing 4 million tons as planned, it is expected to bring in revenues of around 8-10 billion yuan after full production of the 4 million tons capacity.

Regarding hydrogen energy: Vehicle integration is a phased task, and the goal of establishing a hydrogen energy supply network by 2030 remains unchanged.

When discussing the layout of the hydrogen energy industry, Yao Jinlong was enthusiastic: 'Back in 2017 when no one paid attention to hydrogen energy in the industry, we were bullish on the potential of hydrogen energy.'

In 2017, Shanxi Meijin Energy officially entered the hydrogen energy industry, obtaining a 'ticket' for the hydrogen energy industry by acquiring Foshan Feichi Autos, five years ahead of the outbreak of domestic hydrogen energy in 2022. Benefiting from the halo of being the A-share company with the most extensive layout of the hydrogen energy industry chain, Shanxi Meijin Energy saw high growth in market cap in 2019 and 2021, reaching a market cap scale of 80 billion yuan twice.

Seven years later, how is this hydrogen energy industry 'pioneer' performing? Yao Jinlong explained to reporters that Shanxi Meijin Energy's hydrogen energy industry system consists of more than 20 upstream and downstream companies in the industry chain, holding two complete vehicle factories, and investing in nearly all aspects such as carbon paper, membrane electrodes, bipolar plate stacks, fuel cell systems, hydrogen production and supply, and hydrogen refueling stations. In the 2023 annual report, Shanxi Meijin Energy stated, 'The company has basically achieved a complete layout of the hydrogen energy industry chain'.

Yao Jinlong emphasized that Shanxi Meijin Energy's current layout of hydrogen energy mainly focuses on three aspects: first is the construction of the hydrogen energy supply network, including hydrogen production, storage, transportation to infrastructure construction of refueling stations, which is critical for the development of the hydrogen energy industry; second is using hydrogen fuel cell vehicles (Foshan Feichi) as an entry point to develop, produce, and manufacture hydrogen energy equipment, reduce system costs, improve durability and efficiency, and promote the cost parity of hydrogen energy utilization; third is the R&D of key hydrogen energy materials, as some materials are currently imported. Shanxi Meijin will leverage its own industrial advantages to address these bottlenecks. It has successfully achieved the domestication of membrane electrodes through Hongji Chuang Neng and will focus on overcoming the bottleneck of gas diffusion layer through Lieneng New Energy.

On August 29, Shanxi Meijin Energy stated on the investor relations interactive platform that the company has established an industry team covering the entire industry chain in the field of hydrogen energy, with multiple core components leading the industry. Among them, the market share of membrane electrodes is as high as 50%. In the vehicle sector, the holding subsidiaries Foshan Feichi Autos Technology Co., Ltd. and Qingdao Meijin New Energy Vehicles Manufacturing Co., Ltd. have a total annual production capacity of 0.01 million units. They have delivered nearly 4000 various types of fuel cell commercial vehicles to the market, with a total operational mileage of more than 0.15 billion kilometers, and have successfully delivered fuel cell vehicles to Malaysia and Chile. In the field of autonomous driving technology, Feichi Autos and the National Intelligent Connected Vehicle Innovation Center jointly developed a hydrogen fuel cell heavy truck equipped with L4 level autonomous driving system, which has completed road tests.

"Hydrogen fuel cell vehicles have long range and are not affected by temperature, making them suitable for long-distance heavy load conditions, particularly commercial use. It is widely believed in the industry that hydrogen heavy trucks will be one of the first segments of the domestic fuel cell market to commercialize. In the next 10 years, hydrogen fuel cell vehicles may be an important development direction for Shanxi Meijin Energy, but beyond that, Shanxi Meijin Energy will further integrate hydrogen energy into the energy system, achieving deep integration in areas such as electricity, chemicals, manufacturing, transportation, construction, and even residential life."

According to Yao Jinlong, the transition from promoting to popularizing new forms of energy requires a relatively long period, involving work such as establishing energy supply infrastructure, R&D and upgrading of application technologies, and transforming application scenarios. Pure electric vehicles took more than ten years from their introduction to large-scale promotion. Comparing the development trajectory of new energy electric vehicles, hydrogen fuel cell vehicles are currently in a period of intense competition, with no giants yet appearing in various segments of the industry chain. The development of hydrogen fuel cell vehicles is at a critical stage of promotion, with the market size of hydrogen fuel cell vehicles maintaining rapid growth in recent years. In core industrial chains and key technological areas, performance is steadily improving and domestic replacement is gradually being achieved. With the completion of the ecological and systematic application system of hydrogen energy in the transportation sector, hydrogen fuel cell vehicles will achieve large-scale commercial applications.

Discussing Pain Points: The industry has begun to 'implode', further exploring diverse application scenarios.

It should be noted that although the current global stock of hydrogen fuel cell vehicles is only over 0.06 million units, the industry has begun to 'implode'.

According to Yao Jinlong's statement, currently, Foshan Feichi's hydrogen energy commercial vehicles are profitable, but due to the small shipment volume, it leads to a too large amortization of fixed costs. At the same time, the price of hydrogen commercial vehicles has been gradually decreasing every year. For example, the selling price of a 49-ton hydrogen-powered tractor is generally around 1.1 million-1.2 million yuan now, which is about half the price four years ago. Following this trend, in three years, the prices of hydrogen-powered heavy trucks and electric heavy trucks can basically remain stable.

According to public reports, academician Yi Baolian of the Chinese Academy of Engineering predicts that by around 2030, hydrogen fuel cell vehicles will enter ordinary households, the premise to achieve this vision is for hydrogen source costs to drop below 30 yuan/kg to compete with oil vehicles. Yao Jinlong stated that the cost of gray hydrogen refined from the by-products of Meijin Energy Industry is around 10 yuan/kg, and the cost of green hydrogen produced from renewable electricity is around 20 yuan/kg. Taking into account hydrogen transport costs, hydrogen refueling station operating costs, and hydrogen price subsidies, the current hydrogen refueling price is generally controlled at 30-35 yuan/kg. In the future, with the large-scale application of hydrogen energy, hydrogen prices will further decrease.

Currently, Meijin Energy holds shares in both Foshan Feichi and Qingdao Meijin's two complete vehicle factories. Among them, Foshan Feichi ranked first in hydrogen fuel cell heavy truck sales in the industry from 2021 to 2023 and ranked second in hydrogen fuel cell vehicle sales in the industry from 2021 to 2023. Yao Jinlong said, "According to compulsory insurance data, as of January to September 2024, the cumulative insurance coverage for hydrogen fuel cell vehicles, Qingdao Meijin ranks third in the industry with a market share of 8%, Foshan Feichi has a market share of 5%, and together they rank first in the industry."

Yao Jinlong believes that from a technical research and development perspective, the current Chinese hydrogen energy industry chain can basically achieve localization, with no safety issues; from a market application perspective, the biggest pain point lies in the insufficient development of usage scenarios. The combination of these factors has led to the current domestic hydrogen energy industry being characterized by "expensive vehicles and few refueling stations." Based on this, Meijin Energy will further explore multiple application scenarios, comprehensively layout the hydrogen fuel cell related tracks, and enhance the cost advantage of hydrogen fuel cells.

Yao Jinlong mentioned that currently, many key materials in the field of hydrogen energy have wide applications. For example, the gas diffusion layer project being jointly developed by Meijin Energy and academician Zhang Jiujun has applications in the chemical industry, environmental protection, and military industry fields, and this technology is still dominated by foreign countries, becoming a bottleneck in fuel cell development. With the breakthrough in the research and development of this key material, there is hope for complete localization of production and further expansion of these technological advantages to other related fields, in order to fully replace foreign products.

It is worth mentioning that Sinosynergy (09663.HK), invested by Meijin Energy, went public on the Hong Kong Stock Exchange in December last year, becoming the "second hydrogen energy stock" after Yihuatong. Public information shows that Sinosynergy's core products include hydrogen fuel cell stacks and power systems, distributed power generation, and hydrogen production equipment. Based on the shipments and sales volume in 2022, it has become the largest hydrogen fuel cell stack manufacturer in the country and the second-largest hydrogen fuel cell system manufacturer.

In addition, starting with the membrane electrode project of Hongji Chuangneng (Guangzhou) Co., Ltd., Meijin Energy has laid out the upstream and downstream industry chain of core components of fuel cell power systems. Hongji Chuangneng was founded by Canadian academician Ye Siyu. According to Yao Jinlong, the membrane electrode is similar to the electric motor of new energy electric vehicles, accounting for about 50% of the total vehicle cost of hydrogen energy vehicles. Currently, Hongji Chuangneng has a market share of about 50% and is preparing to apply for listing on the STAR Market next year.

Partial interview transcript

Cailianshe: In the industrial chain layout of Shanxi Meijin Energy, what are the considerations behind the acquisition of partial equity in Jinyuan Coal Mine, Zhengcheng Coal Industry, and Zhengwang Coal Industry?

Yao Jinlong: From the national policy perspective, in recent years, various policies and measures have been successively introduced by the State Council, the China Securities Regulatory Commission, exchanges, and other relevant departments to support listed companies in mergers and reorganizations; from the company's perspective, this transaction is an important measure for the listed company's controlling shareholder and actual controller to fulfill commitments to resolve intra-industry competition, this transaction will significantly enhance the independence of the listed company, further promote the integration of the coal business sector of Shanxi Meijin Group, and safeguard the interests of small and medium shareholders of the listed company; in terms of regulatory situation, under the new regulatory situation, we should seize the opportunities for listed companies' mergers and reorganizations, leverage our professional advantages, promote listed companies' resource integration, quality improvement, and industrial upgrading through mergers and reorganizations, thereby enhancing the quality of listed companies.

Cailianshe: What are the current constraints and pain points in the development of the hydrogen energy sector?

Yao Jinlong: Currently, the development of the hydrogen energy industry is constrained by two aspects. On the one hand, the lack of infrastructure in the hydrogen energy industry is a hindrance. China is not lacking in hydrogen, by-product hydrogen is available in various industries, but there is insufficient development of high-purity hydrogen usable for fuel cells, in addition, the extensive road network in China requires a large amount of infrastructure construction to form a dense hydrogen refueling network, and currently the number of hydrogen stations cannot fully meet the needs of all operational scenarios of hydrogen fuel cell vehicles; on the other hand, the standardization of the hydrogen energy industry policy still needs further improvement, the approval process for hydrogen station construction lacks clear guidance, bringing significant uncertainties to enterprises in the advancement of hydrogen energy projects. At the same time, there is a mismatch between the existing support and incentive policies for the hydrogen energy industry and actual application scenarios, which has to some extent slowed down the rapid growth of the hydrogen energy industry.

Cailianshe: The current price war in electric vehicles is a hot topic, will hydrogen fuel vehicles also get involved in price wars in the future?

Yao Jinlong: Price competition is a manifestation of full industry competition and is an inevitable phenomenon in the industry development process. Within a reasonable range, price wars will have positive effects on consumers, industry technological development, and market competition landscape. Firstly, from the perspective of consumers, the reduction in sales prices caused by price wars will better attract consumers, increase their purchasing power and choices, thus promoting the popularity of electric vehicles and increasing market penetration. Secondly, for industry technological development, price wars may encourage companies to increase research and development input, lower costs through technological innovation, and enhance product competitiveness. Lastly, price wars also accelerate industry reshuffling and drive the increase in industry concentration. During this process, companies with core technology, brand influence, and economies of scale are more likely to stand out in the competition. Additionally, price wars also pressure companies to innovate in products and services to maintain competitiveness. In recent years, with technological advancements, product iterations, scale, and localization, the price of hydrogen fuel cell vehicles has gradually decreased.