The Zhitong Finance App learned that last week, the coal market showed a strong upward trend. The spot price of thermal coal in ports rose 31 yuan/ton month-on-month to close at 860 yuan/ton. Tianfeng International believes that the recent month-on-month rise in thermal coal prices is due more to supply-side contraction. Meanwhile, on the port side, downstream inquiries have gradually increased, and some demand for bottom checks has been released, giving port traders a strong will to raise prices. Considering entering the peak season for traditional thermal coal, Dongwu Securities analysts believe that coking coal prices will follow the rise in thermal coal prices, but thermal coal prices are more flexible, which is the first driving force for highly elastic coal targets. Related targets: South Gobi (01878), Yancoal Australia (03668), China Coal Energy (01898), China Shenhua (01088).
In May, as summer temperatures rise, the critical time to welcome the peak of summer is approaching. Recently, Zhang Xing, deputy director of the General Department of the National Energy Administration and press spokesman, said that since this year, electricity consumption has continued to grow rapidly, with the entire society using 2.34 trillion kilowatt-hours of electricity in the first quarter. It is expected that during the summer of this year, the country's electricity consumption load will also grow rapidly. The maximum load will increase by more than 100 million kilowatts over the same period last year, and electricity security and supply are under certain pressure.
According to data from the National Energy Administration, in January-March, the total electricity consumption of the entire society was 2337.3 billion kilowatt-hours, an increase of 9.8% over the previous year, of which large-scale industrial power generation was 227.2 billion kilowatt-hours. Looking at electricity consumption by industry, electricity consumption in the primary sector was 28.8 billion kilowatt-hours, up 9.7% year on year; electricity consumption in the secondary sector was 1505.6 billion kilowatt-hours, up 8.0% year on year; electricity consumption in the tertiary sector was 423.5 billion kilowatt-hours, up 14.3% year on year; and electricity consumption by urban and rural residents was 379.4 billion kilowatt-hours, up 12.0% year on year.
Referring to the electricity supply and demand situation this summer, Zhang Xing, deputy director of the General Department of the National Energy Administration, pointed out that during the peak summer season this year, the country's electricity supply is generally guaranteed, and power supply may be tight during peak periods in some regions, mainly Inner Mongolia and some provinces in East China, central China, southwest China, and southern regions. In the event of extreme and disastrous weather, the tight electricity supply may increase further.
As power companies welcome the peak of summer, the low peak season changes, coal price adjustments end, and coal prices can be expected to rise. Dongwu Securities revised the forecast for coal prices to rise to 1,200 yuan in May to 1,200 yuan in June, and remains optimistic about coal price expectations. It pointed out that in May, power companies need to start stocking up to “welcome the peak of summer,” and it is expected that electricity procurement will improve. Furthermore, the impact of production site safety inspections continues to exceed expectations, compounded by the withdrawal of old mines, and raw coal production is expected to drop by 100 million tons throughout the year. However, the contraction in supply will amplify the supply-demand conflict during the peak demand season in the electricity industry, so it is expected that coal prices will rebound again.
From an equity perspective, Tianfeng International Research reports that the expected dividend rate for coal companies in 2024 is not low, mostly 6%. Judging from the valuation, the valuation of coking coal companies is relatively low, and PE is generally 9-10 times higher. The valuation of thermal coal companies, on the other hand, is relatively high, around 11-14 times. Therefore, from a fundamental point of view, the fundamentals of coking coal are also better than thermal coal, and the price of coking coal has risen markedly recently, yet thermal coal prices have not had many conditions to rise in the short term. Therefore, subsequent coking coal may be more cost-effective than thermal coal.
Related concept stocks:
South Gobi (01878): South Gobi is a coal supplier listed in Toronto and Hong Kong. It is mainly dedicated to the production, logistics and sales of coal. Its main business location is the Aobaut Tauragai Coal Mine in Mongolia, 46 km from the border between China and Mongolia.
Yancoal Australia (03668): Yancoal Australia announced that in the September quarter of 2023 (third quarter), according to a 100% benchmark, raw coal production was 16.1 million tons and commercial coal production was 12.1 million tons. Equity caliber commercial coal production is 9.3 million tons, and equity caliber coal sales volume is 8.6 million tons.
China Coal Energy (01898): On November 13, the company stated on the investor A-share investor interactive platform that the Libi coal mine construction project is progressing in an orderly manner. It is expected to enter trial production by the end of 2025, and production is expected to be completed in about 1 year.
China Shenhua (01088): China's largest coal producer. The company said in November that as the country's latest round of work to optimize the layout of power points progressed, the company seized the thermal power development window period during the “14th Five-Year Plan” period and carried out renovation and expansion projects at existing high-quality power points. The power plant project currently under construction by the company is expected to be completed and put into operation in 2025 or before.