Morningstar

Morningstar, Inc.

Equity Bottom-Up

No-moat Yanzhou Coal’s first-quarter result, with net profit rising 4% year over year to CNY 2.3 billion under PRC GAAP, was largely in line with our expectations. We maintain both our 2019 net profit forecast of CNY 9.7 billion, as well as our fair value estimate of HKD 8.00 per share, as key production assumptions and our long-term bearish coal price outlook are unchanged. Following a 36% share price rise from the beginning of the 2019, we think the shares are fairly valued, with the uptick in…

Following largely in line results, we maintain both our 2019 net profit forecast of CNY 9.7 billion as well as our fair value estimate of HKD 8.00 per share for no-moat rated Yanzhou Coal, as key production assumptions and our long-term bearish coal price outlook are unchanged. Following a 42% share price rise from the bottom of HKD 5.96 at the beginning of 2019, we think the shares are fairly valued, with an uptick in production growth and coal prices largely reflected
Along with a slowing…

China will lower the value-added tax, or VAT, rates as part of a CNY 2 trillion cost cut package to support the slowing economy and tariff dispute with the U.S. This favors Chinese coal producers, who will enjoy a 3% VAT rate cut to 13% on domestic coal production. We expect the VAT rate cut to boost net profits by 4%-10% for the major coal producers we cover, after taking into account the cost-side VAT rate cuts. Among these, we think China Coal is best positioned to benefit with estimated…

No-moat Yanzhou Coal’s decent first-half growth, with net profit rising 34% year over year to CNY 4.6 billion, was boosted by the strong turnaround at Yancoal Australia following its acquisition of Coal &amp; Allied in September 2017. Commercial coal production jumped 40% year over year, with Yancoal Australia contributing 76% of the increment. The sound profitability at Coal &amp; Allied also expanded Yancoal Australia’s gross margin to 53.6% in the first half from 49.1% a year ago. Domestic coal…

No-moat Yanzhou Coal’s strong first-quarter growth, with recurring net profit rising 34% year over year to CNY 2.2 billion under PRC GAAP, reflects the company’s aggressive capacity expansion, despite the weakening trend in benchmark BSPI coal prices. First-quarter commercial coal production jumped 35% year over year, with Yancoal Australia contributing more than 80% of the increment, following its acquisition of Coal &amp; Allied in September 2017. This is in line with our expectations, and we…

China

Yankuang Energy Group Company Limited operates coal businesses. The Company produces fine coal, blown coal, power coal, and coal chemical products. Yankuang Energy Group also conducts power generation, railway transport, machinery manufacturing, and heating businesses.

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