20180607-广发证券_香港_-China_Pulse_Check__Coal_Sector_8页_620kb

China Pulse Check: Coal Sector Summary

Core Content

The China Pulse Check: Coal Sector report provides an analysis of the coal industry's performance in May and outlook for June, focusing on price trends, demand and supply dynamics, and sector valuation. It also includes key data points and ratings for the coal sector and individual companies.

Main Points

May Performance

• The coal sector underperformed in May, with the coal sector index declining by 2.9%, underperforming the SHCOMP and CSI300 by 3.4pp and 4.1pp respectively.
• Thermal coal prices rebounded 8.66% YoY, with the FOB price at Qinhuangdao port reaching Rmb640/tonne as of May 31.
• Coking coal prices increased slightly at the Jingtang port by 1.7% from the end of April.
• Anthracite prices declined by Rmb20-100 in May.
• Coal imports dropped 10.1% YoY and 16.5% MoM in April, primarily due to tightened import policies.

June Outlook

• Thermal coal prices are expected to rise in June, driven by strong demand and low power plant inventory.
• Coking coal prices are likely to remain flat, as the coke market continues to improve and overseas prices have stabilized.
• Anthracite prices may rebound due to increased downstream demand and thermal coal price growth.

Demand Analysis

• Thermal coal demand is supported by high daily consumption at power plants and the impact of hot weather on thermal power generation.
• Coking coal demand has continued to recover, with steel inventory declining and downstream activities resuming.
• Imported coal pressure is expected to be limited due to high prices and reduced foreign supply.

Supply Analysis

• Supply constraints are expected to persist due to ongoing production capacity cuts and safety/environmental checks.
• Raw coal production in April 2018 rose 4.1% YoY, but growth is expected to be low in June.
• Regulated production capacity remains insufficient, and the supply side is likely to stay tight throughout the year.

Sector Valuation

• The coal sector's share prices remain low, and the coal index is significantly down compared to the beginning of the year.
• Despite market pessimism on medium and long-term demand, downstream data suggests that demand is not as weak as feared, and the sector is considered undervalued.

Key Data Points

• Figure 1: QHD port 5,500kcal/kg thermal coal FOB price reached Rmb640/tonne, up 8.66% from end-April.
• Figure 2: Guizhou Shuicheng refined coking coal price increased by Rmb20 in May.
• Figure 3: Anthracite prices declined by Rmb20-100 in May.
• Figure 4: RB Index rose 8.18% MoM, while ARA fell 10.15% MoM and NEWC increased 6.16% MoM.
• Figure 5: Premium hard coking coal at Hay Point Port reached US$189/tonne as of May 31.
• Figure 6: The price advantage of imported coal widened in May.
• Figure 7: China's thermal power generation rose 7.1% YoY in the first four months of 2018.
• Figure 8: Crude steel output increased 5% YoY in the first four months of 2018.
• Figure 9: Cement output decreased 1.9% YoY in the first four months of 2018.
• Figure 10: Coal inventory at six key power plants was 12.66m tonnes as of April, down 0.34m tonnes from end-April.

Sector and Company Ratings

• Sector Ratings:

  • Positive: Expected to outperform benchmark by more than 10%.
  • Neutral: Expected to underperform or outperform benchmark by less than 10%.
  • Cautious: Expected to underperform benchmark by more than 10%.

• Company Ratings:

  • Buy: Expected to outperform benchmark by more than 15%.
  • Accumulate: Expected to outperform benchmark by more than 5% but not more than 15%.
  • Hold: Expected stock relative performance ranges between -5% and 5%.
  • Underperform: Expected to underperform benchmark by more than 5%.

Key Companies

• Shaanxi Coal Industry (601225 CH): Highlighted for its cheap valuation.
• Lu'an Environmental Energy Development (601699 CH): Highlighted for its cheap valuation.
• Yang Quan Coal Industry (600348 CH): Highlighted for its cheap valuation.

Risks

• Weaker-than-expected economic growth.
• Declining demand more significantly than anticipated.
• Supply-side reform falling short of expectations.
• Greater-than-expected coal price drops.

Additional Information

• The GFS China Pulse Check series offers monthly updates on various sectors, including:
  • Steel sector: Supply and demand analysis, raw material prices, steel and iron ore prices, and outlook.
  • Steel trade data: Exports, imports, profitability, and outlook.
  • Crude steel output: Monthly and daily output, and outlook.
  • Coal sector: Prices, supply and demand analysis, and outlook.
  • Property sector: Policy reviews, transactions, land supply, and liquidity.
  • Auto sector: Sales breakdown and raw material costs.
  • Building materials sector: Cement/glass output and prices, and downstream industry growth.

Disclaimer

This report is prepared by GF Securities (Hong Kong) for informational purposes only and does not constitute an offer to buy or sell securities. It is intended solely for use by clients of GF Securities (Hong Kong). The information may be subject to change without notice, and GF Securities (Hong Kong) accepts no liability for any losses arising from the use of this report. Investors should exercise their own judgment and consult professional advice before making investment decisions.