UBS released a research report stating that it gave China Shenhua (01088) a “neutral” rating. Shenhua's prospects and performance guidelines have not changed, and investors are still expected to respond positively to the company's first quarter results. Although the results for the first quarter of this year were mainly due to preferential tax rates, compared with other coal mining peers, I believe the market will be optimistic about the resilience of its profits. The target price is HK$28.5.
According to the report, the company's performance for the first quarter of 2024 reached 29% of the market's consistent full-year forecast, while also reaching 31% of the bank's full-year profit forecast. Shenhua's profit for the first quarter beat expectations. The bank explained that it was mainly due to tax performance. The effective tax rate for the same period was 16%, below the normal range of 20% to 24%; the electricity business performance during the same period also beat the forecast. The first quarter recorded a 12.4% year-on-year increase in gross profit, mainly due to the contribution of the company's additional thermal power generation capacity. As for the performance of the coal mining business, which continues to be stable, it is mainly due to its relatively high share of contract sales. As for achieving the average price of coal sales, the average price of coal sales fell by about 1% from quarter to quarter.