Jin Wu Financial News | HAITONG SEC released a Research Report indicating that SHOUGANG RES (00639) primarily engages in the mining of Coking Coal, as well as the production and sales of raw Coking Coal and refined Coking Coal, located in the core production area of high-quality Coking Coal mines. The company was established in 1985, and in 2009, Hong Kong Shoukong undertook capital operations to acquire Fushan International Energy Group Limited, and was renamed SHOUGANG RES in 2011. In 2021, the Shareholders further acquired at a premium, demonstrating confidence in development. The company's controlling shareholder and actual controller is the Shougang Group (holding a total of 33.3% as of the 2024 mid-term report), which is also a strategic customer of the company, dedicated to becoming one of the major integrated Coking Coal producers in China.
The report states that the company's three mines, Xingwu Coal Mine, Jinjiazhuang Mine, and Zhaiyadi Coal Mine (each with a capacity of 1.75 million tons/year), are all located in the core production area of high-quality Coking Coal in Liulin County, Shanxi, China. The Coking Coal produced is highly valued for its scarcity and economic value, earning it the nickname 'Panda Coal.' Over the past five years, the company's production of raw coal and refined coal has steadily increased, and in 2024, the replacement of coal in the upper and lower sections of the Xingwu Coal Mine will complete pilot operations, with production expected to steadily rise. The good quality of the refined coal produced by the company has established a strong customer base, with the largest customer, Shougang Group and its holding companies, accounting for over 40% in the past three years (43% in 2023), which is beneficial for maintaining high prices. The company's cost control results are significant, as the cost per ton of coal measured in raw coal terms is 419 yuan/ton in 2023, reflecting a year-on-year decrease of 16%.
The institution believes that as a high-quality hard Coking Coal producer under the Shougang Group, the company has significant product quality and CNI Resource Index advantages, and that the Coking Coal main business is expected to maintain high profitability. The institution forecasts that from 2024 to 2026, the company's Net income attributable to shareholders will be 1.67/1.77/1.82 billion Hong Kong dollars, with corresponding EPS of 0.33/0.35/0.36 Hong Kong dollars. Referencing comparable companies in the Coal Sector, a price-to-earnings ratio of 10 to 12 is given for 2024, corresponding to a reasonable value range of 3.27 to 3.93 Hong Kong dollars, with an initial coverage rating of 'Outperform the Market.'
