Lower Production Drove Shenhua's Soft 1H; Shares Slightly Undervalued.
Narrow-moat China Shenhua's preliminary first-half result is no surprise, with net profit falling 7% year over year to CNY 24.5 billion, likely attributable to a 4% cut in coal output and softer prices. A 2% drop in Shenhua's long-term contact coal price, which accounts for about 80% of the company's coal output volume, and production suspension at Ha’erwusu and Baorixile Open-pit mines in Inner Mongolia since August 2017, hurts revenue. We expect output to recover in the second half with the mi...China Shenhua Energy and its subsidiaries are engaged in the production and sale of coal; the generation and sale of power; and providing transportation services in the People's Republic of China (the "PRC"). Co. operates coal mines as well as an integrated railway network and seaports that are used to transport Co.'s coal sales. The primary customers of Co.'s coal sales include power plants and metallurgical producers in the PRC. Co. also operates power plants in the PRC, which are engaged in the generation and sale of coal-based power to provincial or regional electric grid companies.
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