20161103-Credit Suisse-China Coal Energy Company Limited.pdf

03 November 2016 Asian Daily DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. China Coal Energy Company Limited ---------------------------- Maintain UNDERPERFORM Notes from the CIC: Ramp up of additional supply at gradual pace EPS: ?? TP: ?? Trina Chen / Research Analyst / 852 2101 7031 / trina.chen@ ● Yesterday (02 Nov) at CIC, the company mentioned that it expects industry output from advanced capacity to add 1.2 mnt/d incremental supply, yet execution should be gradual, as ramp-up time varies by mines. There should be small step-up in output in November. Pricing correction should be modest. ● NDRC is pushing for long-term contract between coal and power companies and encourage to set fixed long-term price and amount for next year. Chinacoal will follow the benchmark set by Shenhua. ● Chinacoal is trying to accelerate the approval application of two new mines, under current policy context, to put in trial production in 2017E. Recent coking coal price has witnessed even higher growth, yet there is no output increase for coking coal currently. ● We view coal price peaking in the coming months. Maintain UNDERPERFORM, with a price target of HK$2.9. Click here for detailed financials Figure 1: Earnings and valuation sensitivity—Chinacoal EBITDA/t is for coal only. Source: Company data, Credit Suisse estimates Key takeaways: (1) At CIC, the company stated that it expect the additional supply from the class-1 safety mines and the 74 advanced capacity to take more effect in November by ad