Core Viewpoint - The report from CICC indicates a downward adjustment in coal price and cost assumptions, leading to a 4% reduction in Shougang Resources' (00639) estimated profits for 2025/26 to HKD 8.92 billion and HKD 9.78 billion respectively. The current stock price corresponds to a P/E ratio of 15.8x/14.4x for 2025/26E, with an enhanced relative attractiveness of dividends due to changes in risk appetite. The target price remains unchanged at HKD 3.00, implying an 8% upside potential based on a P/E ratio of 17.1x/15.6x for 2025/26E [1]. Group 1 - The company's 1H25 performance exceeded expectations, with a net profit attributable to shareholders declining by 38% year-on-year to HKD 4.04 billion, which was better than anticipated due to a smaller decline in profits driven by coal prices, as cost reductions were greater than expected [2]. - Production recovery was noted, with 1H25 raw coking coal and premium coking coal output increasing by 17% and 19% year-on-year to 2.64 million tons and 1.54 million tons respectively. The premium coking coal sales rose by 16% year-on-year to 1.55 million tons, primarily due to the resumption of operations at the Xingwu coal mine [2][3]. - The average selling price of premium coking coal in 1H25 fell by 45% year-on-year to HKD 1,067 per ton, while the price of Shanxi main coking coal decreased by 36% to HKD 1,401 per ton. The decline in selling prices was attributed to changes in coal quality and the commencement of full-scale mining at the Xingwu coal mine [2]. Group 2 - Significant improvement in unit production costs was observed, with the unit production cost of raw coking coal decreasing by 28% year-on-year to HKD 328 per ton. Cash costs fell by 32% year-on-year to HKD 241 per ton, and cash costs excluding uncontrollable costs decreased by 31% year-on-year to HKD 185 per ton [3]. - The net operating cash inflow for 1H25 was HKD 4.53 billion, a year-on-year decrease of HKD 7.27 billion. As of the end of June, the company had available free funds of HKD 94.75 billion, which, after excluding the year-end dividend for 2024, amounted to HKD 84.06 billion [3]. - The company plans to distribute an interim dividend of HKD 0.06, corresponding to a payout ratio of 76%, resulting in an interim dividend yield of approximately 2.2% based on the current stock price [3]. Group 3 - In 3Q25, coking coal prices have rebounded, with the price of Liulin No. 9 coking coal rising from a low of HKD 968 per ton in June to HKD 1,278 per ton by August 28. The average price since 3Q25 has been HKD 1,209 per ton, reflecting a 10% increase compared to 2Q25 [4]. - The outlook for coking coal prices remains cautiously optimistic, dependent on whether domestic supply can contract further, amidst weak steel demand and declining profits, which may still lead to expectations of reduced coking coal demand [4].
中金：维持首钢资源(00639)跑赢行业评级 目标价3港元