Maintain UNDERPERFORM
FY16A results summary: Better cost control and special dividend; coal price outlook remains a concern
Shenhua’s 2016A NP was Rmb24.9 bn, or Rmb1.25/sh, up 41% YoY. On a recurring basis, EPS was Rmb1.40, up 28% YoY, 10-17% ahead of CS estimates and consensus, due to lower-than expected costs. In addition to the 36% dividend payout, Shenhua also announced a special dividend of Rmb2.5/sh.
Gross profit of coal rose 49% YoY due to higher coal price combined with better cost. 4Q16 ASP surged by 34% QoQ, in line with QHD prices. Unit COGS fell 11% YoY, in line (or 3% better with recategorisation).
Unit transport cost was Rmb15/t lower YoY. Profit from Power was ahead of estimates due to better fuel cost.
OCF was Rmb83 bn, up 63% YoY, yet partly due to Rmb26 bn higher payables (mostly including notes payables).
We revised up earnings by 19% in 2017E, to reflect the higher 2017E QHD price (from Rmb510/t to Rmb575/t). We view the current spot coal price at peak, and downside risk in 2H17E due to release of additional supply by government (both new capacity and restart post safety checks in 1Q17).
Maintain UNDERPERFORM with a revised target of HK$15.3 (from HK$14.0).
Source: CS