Lower Production Drove Shenhua’s Soft 1Q; Shares Fairly Valued on Weakening Coal Prices
China Shenhua’s soft first-quarter result, with net profit falling 5.7% year over year to CNY 12.2 billion under IFRS, contains few surprises, with weakness in the coal segment being the key drag. This should be attributed to an 8% cut in coal output, due to the the production suspension at Ha’erwusu and Baorixile Open-pit mines in Inner Mongolia since August 2017, which also drove unit production cost up 5% given the volume drop. We think these are only temporary factors, and we expect Shenhua’...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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