by winston » Tue Sep 20, 2022 3:10 pm
not vested
CHINA SHENHUA(1088)
Analysis:
China Shenhua is the leading vertically integrated coal company in China, with coal upstream, transportation in the middle and power generation and coal chemical downstream.
In terms of the coal business, the company produced 307 million tons of coal in 2021, accounting for 9% of the country`s total output.
Its recoverable reserve is 14.1 billion tons and the recoverable period is close to 50 years.
In terms of the power generation business, the company generated 166.5 billion kWh of electricity in 2021 and consumed 51 million tons of coal, accounting for 17% of the company`s coal output.
In terms of the chemical industry, the company`s chemical production capacity reaches 600,000 tons and polyethylene and polypropylene each have 300,000 tons.
We believe that China Shenhua`s positive factors are mainly in two aspects.
First, the company`s payout ratio will rise. Due to policy restrictions on developing new coal mines, we expect the company`s capital expenditures to remain low and the company`s high dividend rate policy to continue.
Second, the market ignores the importance of fossil energy in the energy transition, resulting in China Shenhua`s under-valuation, with a P/E ratio (last 12 months) of only 6.6x.
In fact, China`s demand for coal will continue to rise, and coal will be in short supply. We believe that China Shenhua is still very cheap, and investment opportunities in the short, medium, and long term still exist.
Strategy:
Buy-in Price: $24.55, Target Price: $26.50, Cut Loss Price: $22.53
Source: Phillips
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