CSEC,China Shenhua(601088) 光大证券·2024-11-20 08:05Investment Rating - The report initiates coverage with a "Buy" rating for China Shenhua [5][12] Core Views - China Shenhua is positioned as a comprehensive energy giant with a strong competitive advantage in the coal industry, supported by its state-owned enterprise background and integrated operations across the coal supply chain [1][42] - The company's high proportion of long-term coal contracts mitigates the impact of declining coal prices on profitability, with 79.5% of its coal sales in 2023 being long-term contracts [2][70] - The report forecasts stable profitability and dividends for the company, with expected net profits of 58.38 billion, 60.83 billion, and 63.81 billion yuan for 2024-2026, respectively [3][12] Summary by Sections 1. Integrated Energy Giant - China Shenhua, controlled by the State-owned Assets Supervision and Administration Commission, is the largest listed coal company in China, with a coal production of 325 million tons in 2023 [1][42] - The company has a diversified revenue structure, with coal, electricity, transportation, and coal chemical businesses contributing 64%, 22%, 13%, and 1% to revenue, respectively [1][50] 2. Long-term Contracts Support - The company’s long-term coal sales are primarily based on annual contracts, which account for 79.5% of total coal sales in 2023 [2][70] - The pricing mechanism for long-term contracts is designed to stabilize prices, with a limited impact from spot price fluctuations [2][78] 3. Profitability and Dividend Assurance - The report anticipates that coal supply and demand will remain balanced in 2024, with port prices expected to stay above 800 yuan per ton [3][10] - China Shenhua has maintained a high dividend payout ratio, with 75% in 2023, and is expected to continue this trend due to limited capital expenditures [3][53] 4. Financial Projections - The projected net profits for China Shenhua from 2024 to 2026 are 58.38 billion, 60.83 billion, and 63.81 billion yuan, translating to EPS of 2.94, 3.06, and 3.21 yuan, respectively [3][12] - The current price-to-earnings ratio is estimated at 14 for 2024 and 2025, and 13 for 2026, indicating a stable valuation [3][12]