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雷达卡
UBS Investment Research
China Coal Energy
Benefiting from the coal crunch
„ The main issue is the coal shortage
We believe China is in a structural coal shortage. We estimate 2008 China coal
supply will be limited to 8% YoY, and if GDP growth is higher than 8%, coal
demand growth should exceed supply growth. We also think road, rail and
shipping infrastructure may not be able to handle increased coal volumes in 2008-
09E.
„ High coal prices are here to stay
Rather than focusing on short-term concerns such as increased costs, possible coal
price caps and even historically high PE valuations, we believe this is the start of a
sustained period of high coal prices. We believe the coal industry’s fixed asset
investment (FAI) from 2004-07 is insufficient, and price caps cannot work in a
shortage. Unlike 2004, coal transportation gains may not match demand growth.
„ Difference is our view on coal shortage and valuation
We forecast China Coal Energy’s (China Coal) net profit to increase 65% to
Rmb9.6bn in 2008, and 25% to Rmb11.9bn in 2009. Our 2008-09 earnings
forecasts are in line with consensus. However, the key difference is our view of a
sustained coal shortage, which we believe will drive continued stock re-rating
despite valuation, earnings leverage and demand concerns.
„ Valuation: initiate coverage with a Buy rating and PT of HK$27.15
We use our regionally consistent approach to value China Coal, deriving a base-
case NPV of HK$21.35 based on WACC of 11.7%, and adding 50% of the bull-
case NPV to reach our price target of HK$27.15. This implies 34.3x 2008E and
27.5x 2009E PE.
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