Haohua Energy (601101): High Cash, Low Debt State-owned Enterprise Reform Benefits Target

Haohua Energy (601101): High Cash, Low Debt State-owned Enterprise Reform Benefits Target

Coal production capacity is gradually transferred to Mengxi, and profit release is released: Since the supply-side reform of the coal industry, the company’s Jingxi mining area has a total capacity of 300 tons in 2016-2018, and the remaining 220 tons capacity is expected to exit by 2020.

However, the Hongqingliang coal mine (600 tons / year) in the Mengxi mining area has been officially put into production in July 2018, and the Gaojialiang coal mine has also increased its nuclear production to 750 tons / year. It is expected that the new production license will be completed in 2019.The two mines added a total of 960 tons of annual production capacity and a net profit of about 100 yuan per ton of coal.

The coal chemical business is operating stably and the advantages of the industrial chain are obvious: The coal mine supporting the company’s 40 coal-to-methanol project is Hongqingliang Coal Mine, which has been consolidated in July 2018 and has been put into operation across this coal mine.With good control of production costs, while maintaining relatively high quality, the advantages of the industrial chain will be prominent, and market competitiveness and anti-risk capabilities will be further improved.

Since the coal chemical project was put into production in 2016, the company has maintained a high gross profit margin, which has remained above 20%.

After the supporting coal mines were put into production in 2018, the company’s gross profit margin increased to 23.

5%, second only to Yanzhou Coal’s 35.

51% and 24 of China Coal Energy.

4%, with industry competitiveness, the annual contribution of gross profit maintained at about 200 million.

Financial characteristics of high cash and low debt are prominent.

As of the 2018 annual report, the company holds monetary funds26.

At the same time, the company’s current asset-liability ratio is only 38.

82%, only 31% of China Shenhua, the top leading company in the industry, and far below the average level of 55% of similar thermal coal listed companies.

With the continuous withdrawal of coal production capacity in the Jingxi mining area, the company’s asset scale continues to expand, and the company urgently needs to expand its asset expansion business in order to enrich the company’s asset scale.

The company is expected to benefit from Beijing’s SOE reform.

On November 29, 2018, Beijing adopted the “Three-year Action Plan for Further Deepening the Reform of State-owned and State-owned Enterprises to Promote Transformation and Development” (2018-2020), saying that it will promote the reform and development of Beijing state-owned and state-owned enterprises at a deeper scale.

Jingneng Group, as the only comprehensive energy group of Beijing State-owned Assets Supervision and Administration Commission, transferred to the consolidation and internalization of Jingneng Group’s internal assets from 2015 to 2018. It is expected that Jingneng Group will usher in the first year of deepening state-owned enterprise reform in 2019.

At the same time, it is expected that Haohua Energy, as one of the four listed company platforms of the Jingneng Group, will also usher in an important opportunity for state-owned enterprise reform.

Investment suggestion: With the relatively stable replacement of thermal coal prices, the company’s EPS is expected to be 0 in 2019-2021.

81 yuan, 0.

89 yuan and 0.

92 yuan; 杭州桑拿 the corresponding PE is 7.

8 times, 7.

1x and 6.

88 times, from the perspective of estimation, the company and other comparable thermal coal companies carried out an estimation and comparison analysis, and the company was estimated to be undervalued.

Taking the six major A-share coal companies as benchmarks, the average PE from 2019 to 2021 is 9.

37 times, 8.

66 times and 8.

16 times, the company’s PE discount rate is 18%?
21%; static PB estimation angle, the average PB of thermal coal companies is 1.

25 times, while the company’s PB is only 0.

9 times, a discount of 37%, incorporated into the company’s state-owned enterprise reform expectations, and has configuration value.

Covered for the first time, giving the company a “Buy” rating.

Risk warning: the decline of the macro economy leads to a decrease in demand and a decrease in the price of the company’s products.

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