China Shenhua revenues or doubles within five years

CICC believes that although the probability of China Shenhua's asset injections this year has been modest, subsequent asset injections are still available.　　Liu Jianping mapping China Shenhua recently conducted a performance exchange with overseas investors, and we believe that China Shenhua's integrated business model will help it consolidate its long-term competitive advantage.　　We believe that China Shenhua coal production will have a larger growth space under the support of the extension of the para-er mining area and the future development of the new Street mining area, and it is expected to achieve a five-year business income doubling plan.　　In the long run, with the improvement of the quality and efficiency of the parent company's coal assets as well as the gradual maturation of the coal chemical industry and wind power business, asset injection will further enhance the value of China Shenhua. At present, China Shenhua A, H shares corresponding 2010-year P/E ratio is 14.2 times times and 13.9 times times respectively, the dividend yield is 2%. Considering its competitive advantage, the valuation of China Shenhua A shares is attractive in similar companies, while the premium of the Hong Kong stock market also reflects the recognition of the industry leader.　　Therefore, we still give the "recommended" investment rating.　　China Shenhua yesterday closed at 24.08 yuan, down 3.33%.　　The five-year growth target has been successfully promoted with the support of the expanded Para-grid mining area and the development of New Street mining area, China Shenhua is expected to achieve its medium-term production target. At present, the Eastern Mining area annual output capacity of about 180 million tons, the future will reach 200 million tons.　　The capacity of the Para-grid mining area is about 45 million tonnes and is expected to expand to 100 million tonnes. At present, the new Street mining area is still in the Prophase project approval stage, the production capacity is expected to reach 50 million tons 2015 years ago.　　Because the new Street mining area is deep, the cost will be higher than the eastern mining area, but the coal quality is very good, calorific value of more than 6000 kcal/kg.　　With the expansion of existing coal mines and the birth of the new Street coal mine and the steady rise in the price of coal, China Shenhua is likely to achieve the strategic goal of doubling the five-year sales revenue by the end of 2015.　　2010 China Shenhua capital expenditure plan for 41.1 billion yuan, of which 44% will be used for coal business, 35% for transportation, the remaining 21% for electricity and other business sectors.　　We expect China Shenhua to operate cash flow of about 50 billion yuan in 2010, plus China Shenhua holds 66 billion yuan in cash at the end of 2009, enough to support the company's capital expenditure plan.　　Benefit "Integrated business model" in the next few years, although the coal industry cost is bound to increase gradually, but China Shenhua compared with similar companies, its integration model for its greater competitive advantage.　　With its power plants, railways, ports and fleets, China Shenhua has greater control over coal sales, has been able to generate higher profits from the entire supply chain, reduced the adverse effects of continued long-term cost increases, and the constraints on most long selling orders. China Shenhua's power generation business has been among the largest domestic companies.　　With a good geographical location and low construction cost amortization, compared with other listed power companies, Shenhua's power generation business uses the highest hourly and lowest cost. China Shenhua expects future shipping capabilities to be from the eyeUp to 70 million tonnes of 40 million tonnes a year ago will be a major player in the offshore coal transport business.　　In addition, China Shenhua will expand the port throughput capacity, is expected to the Huanghua port and Shenhua Tianjin coal terminal throughput capacity to 100 million tons and 60 million tons respectively. China Shenhua currently has four railways: Bao-Shen Railway, Shen Shuo Railway, Shuo-Huang Railway and the big-quasi railway. In the long run, China Shenhua plans to build a railway transportation network through the West Coal transport and Northern channel.　　At present, the God-Shuo line is a major bottleneck, the railway is located in mountainous areas, the expansion of the difficulty is relatively large. The current capacity of the Shen Shuo line is about 180 million tons, the future can reach 200 million tons.　　The yellow line capacity of 200 million tons, but can be expanded to 300 million-400 million tons.　　We believe that the construction of coal reserves along the coast, rivers and railways will help China Shenhua enlarge its market share and penetrate the central China market, which is constrained by the bottleneck of capacity, and the supply of coal is increasingly scarce in these areas.　　Increase in the proportion of spot coal sales in addition, it is worth mentioning that China Shenhua will be part of the contract coal sales and spot coal prices directly linked to more participation in the spot market of coal prices rise.　　According to the new pricing mechanism, China Shenhua will increase 10% of contract coal sales in accordance with the spot market price pricing (and Qinhuangdao spot power coal price directly linked), so as to enjoy the spot market of coal price rise, but also to maintain long-term cooperation with customers, lock the vast majority of coal sales. Given China's huge production of Shenhua coal, it is unlikely to complete the sale of all coal in the spot market, which will also increase the risk of the company's sales during the downturn.　　The new pricing mechanism allows China's Shenhua to become more involved in price increases, while also enabling it to secure adequate protection during the downturn.　　Subsequent asset injection although China Shenhua's 2010-year asset injection is unlikely, future asset injections are expected to boost the company's value. The water seepage accident at Camel Hill coal mine delayed the injection of Wuhai coal mine into China Shenhua, which was scheduled to be injected into China's capital in 2010. At present, China Shenhua has 17.7 billion tons of resources and 11.4 billion tons of recoverable coal reserves. According to the International standard of JORC (resource storage), China Shenhua has 6.9 billion tons of coal reserves to sell. In the future, New Street and Elm Mining area will be more than 10 billion tons of resources.　　In the long run, other assets in Xinjiang, Ningxia and other fields are expected to contribute more resources.　　In addition, we believe that with the maturing of the parent company-led coal chemical industry and wind power business, there is a high likelihood that China Shenhua will be injected into the future, which would further enhance its value. In addition, China Shenhua continues to seek opportunities for overseas acquisitions as a useful complement to its domestic operations. Currently it has some assets in Australia and Indonesia.　　In addition, China Shenhua has been following the Mongolian TT project for many years.　Extension of the News "Coal industry resources tax in the second half of the fastest push" Cicc Han Yong If CPI can always be in manageable range, the second half of this year may launch the coal industry to levy a resource tax reform program.　Resource tax has been discussed for more than 3 years, if the CPI can be maintained under 3%, will be the second half of the coal industry to introduce a resource tax to provide a good time window.　　The recent European sovereign debt crisis and China's tightening policy have eased the inflationary pressures facing China.　　It is understood that the general expected tax rates in the industry will initially be set at the 3%~5% of coal prices, although future tax rates are likely to rise.　　After the introduction of resources tax, China may integrate other resources and environment-related taxes levied by local governments. According to China Shenhua and customers signed the supply of coal contract, if the levy of resources tax, the two sides will negotiate a separate coal Chang.　　Still, if the resource tax comes at the end of the four quarter this year, China Shenhua may continue to carry out the current Chang. In addition, as long as the CPI is manageable, we expect to be able to raise electricity prices with the introduction of a new resource tax. In this way, electricity price increases can be transmitted to downstream users. An increase of 2 points per electricity price will give the coal price up to 50-60 yuan per ton of space.