Business Summary:

China Shenhua business is divided into the following segments: (a) Coal business: coal mining and sales in surface and underground mines; (b) Power generation business, coal power generation, wind power generation, hydropower generation and gas power generation and sales; (c) Railway business: providing railway transportation services; (d) Port business: providing port cargo loading, unloading, handling and storage services; (e) Shipping business: providing shipping transportation services.

The stock is also listed on the Shanghai Stock Exchange, as code of 601088.SS.  

Financial Summary:

For the six month period ending June 30, 2004, the group’s revenue was RMB168.078 billion (which reached 2024 target of 50.9%), a decrease of RMB1.364 billion (or 0.8%). The profit was RMB 32.771 billion, a decrease of RMB 4.090 billion (or 11.1%) The gross profit recorded RMB 50.232 billion; a decrease of 9.2%. Basic earnings per share were RMB 1.649.

Commercial coal production was 163 million tons, an increase of 1.6% year-on-year, completing 51.6% of the annual target. Coal sales volume was 229.7 million tons, an increase of 5.4%, completing 52.8% of the annual target. Power generation was 104.04 billion kilowatt hours, an increase of 3.8%, completing 48.1% of the annual target.

Affected by factors such as the overall loose supply and demand relationship in the coal market, the average sales price of coal dropped from RMB 601/ ton to RMB 566/ ton, a decrease of 5.8%. The average electricity sales price dropped by 3.3% to RMB 404/ MWH.

Risks:

1. Variation of domestic and foreign economic policies
2. Weaker-than-expected market demand and keen industry competition
3. Recent instability in international energy markets affecting coal prices
4. Exposure to RMB currency fluctuations and any possibly related loss from hedges
5. Possibly higher-than-expected cost for production cost and network expansion

Technical Analysis:

The stock prices hit 52-week high of $38.3 (including ex-dividend factor on June) on July, 2024. The price has dropped by about 19.0 % to recent-low of $30.15.  It is suggested to accumulate the share between the present price and $30.0. The target price for medium term and long term is $34.0 & $36.0 respectively. Cut-loss price will be $29.0.

References

www.hkex.com.hk 

www.etnet.com.hk

www.shenhuachina.com

I, Gary Tam, am a licensed person under the Securities and Futures Commission. Until the date this commentary was published, neither I and/or my affiliates are the beneficiary of the securities mentioned herein or are entitled to any financial interests in relation thereto.