China Coal (HKEX: 1898) and China Shenhua (HKEX: 1088): Coal Price Upticks Amid Tight Supply
Recommendation: BUY
- Target Price for China Coal: HKD 9.7
- Target Price for China Shenhua: HKD 38.76
- Date of Recommendation: September 9, 2024
- Broker Company: MIB Securities (Hong Kong) Ltd
Investment Thesis:
Coal prices in China have stabilized after five consecutive weeks of mild declines, driven by declining inventory at northern ports and production pullbacks. The slight uptick in prices was further supported by logistics disruptions caused by heavy rainfall. Both China Coal and China Shenhua are expected to benefit from the current tightness in coal supply, which should support their earnings in the near term.
As leading coal producers, China Coal and China Shenhua are well-positioned to take advantage of these price improvements. Their ability to navigate supply constraints and maintain production levels provides stability for their financial performance.
Financial Performance:
With coal prices showing signs of recovery, both companies are expected to see improvements in their top-line and bottom-line figures. Higher average selling prices and consistent production volumes are likely to support stronger quarterly earnings.
Valuation and Catalysts:
The target prices of HKD 9.7 for China Coal and HKD 38.76 for China Shenhua reflect the potential for continued upward momentum in coal prices. Investors can expect further gains as supply remains tight and demand continues to rise, particularly in energy-dependent industries.
Thank you
