FY1Q17 results slightly miss DBe while beat Bloomberg consensus
China Coal announced FY1Q17 results after market close on 27 April 2017. Its1Q17 NPAT （IFRS） was reported at RMB1.47bn, slightly missed DBe byachieving 30% FY17DBe （IFRS）， but beat market consensus by representing35% Bloomberg consensus, respectively. We believe the weakness came fromlower-than-expected coal and coal-chem products shipment volume andlower-than-expected coal-chem margins.
　　Disappointing 1Q17 shipment of both coal and coal-chem
Total self-produced coal shipment shrank by 6.5% YoY. Coal-chem sales fellsignificantly. Sales of polyethylene, polypropylene, urea and methanol in 1Q17declined by 3% YoY, 23% YoY, 33% YoY and 70% YoY, respectively. Wenoticed that the production of coal-chem products dropped much less than thesales volume, which may imply there is some inventory of coal-chem productswith relatively high cost built up. Unit cost of coal-chem YoY hike was fasterthan its ASP YoY improvement in 1Q17. We expect coal-chem unit cost shoulddecline once again when the sales volume recovers and coal price decreases.
　　Resilient coal price expected, Buy reiterated
Based on our coal price forecast of FY17 at RMB609/t （see our report, QHDpremium widens once more, published on 16 Mar, 2017）， we believe ChinaCoal should be the beneficiary of resilient coal price in the next 3 years （4-6%ROEs） and could realize strong YoY improvement in 2017. The stock is nowtrading at only 0.5x 2017DBe BVPS.