Beat Bloomberg consensus for 1H17 with 913% YoY NPAT improvement
China Coal announced its 1H17 results after market close on August 23. Thecompany has delivered RMB37.1bn for revenue (41%YoY), achieving 49%FY17 DBe and 53% Bloomberg 2017 full year consensus. The companyrecorded RMB2.28bn for NPAT (913% YoY), representing 48% of FY17 DBeand 52% Bloomberg 2017 full-year forecast. We believe 1H17 results slightlybeat market consensus while being in line with DBe. The company announcedits profit alert on July 24 for its PRC-GAAP NPAT at RMB1.5bn – 1.8bn, theactual H-share bottom line in the reporting period is better than expectedbased on the profit alert.
Higher-than-expected coal ASP but coal-chem profit disappointed DBe
The company delivered higher-than-expected commercial coal ASP ofRMB502/t in 1H17 (80% YoY). COGS/t of self-produced coal also increased toRMB303/t (18% YoY), higher than expected due to increased inputs for safetyproduction, lifted transportation costs, and government levies. Meanwhile,major disappointment comes from coal-chem segment. Sales volume forOlefins in 2Q17 only achieved 47kt, c.46% drop QoQ, and Methanol shipmentexperienced c.70% drop QoQ (17kt in 2Q17). With coal-chem products ASPgenerally in line with our estimate, the segment only delivered gross profit ofRMB0.88bn during 1H17, c.33% of our full year estimate.
Outlook remains optimistic, Buy reiterated
Our house forecast for QHD price (5500kcal, FOB, VAT incl.) in 2017 isRMB620/t, and we believe coal price should stay at c.RMB600/t into 2018, dueto resilient demand and slow ramp-ups of incremental supply.With improving ROE (2017 annualized ROE at 5.5%) and optimistic coal sectoroutlook for 2H17 and 2018, the company’s current PBx at 0.5x 2017DBe BVPSlooks undemanding. Buy re-iterated.