Across The Border | Hard times for China’s coal miners means China Shenhua Energy is worth a look, analysts say
Shares of China’s premier coal producer are set for better days ahead
If one is to pick a Chinese coal mining firm to invest in amid the prolonged industry downturn and stock bear market, a fair bet would be industry leader China Shenhua Energy, according to analysts.
The Beijing-based company, the nation’s largest coal miner and one of the largest power producers with major coal logistics and coal-to-liquid fuel and chemicals operations, is among only 10 per cent of the nation’s over 6,000 miners to remain profitable in an industry enduring its fifth year of price decline due to oversupply.
“Shenhua has the industry’s best management team and corporate governance structure, and its coal-power-railway-shipping-chemical integrated business model has shown in its financial reports a clear advantage amid [the commodities] cyclical volatility,” said Zhongtai Securities analyst Liu Zhaoliang in a report.
He expects Shenhua to see further growth in its power operation and benefit from the industry’s ongoing consolidation.
By his estimates, its “reasonable” valuation is 340 billion yuan (HK$405.64 billion), compared to its current market capitalization of 253 billion yuan.
