Datong Coal Industry: a badly underestimated steam coal leader

kgi securities

The biggest beneficiary of China's coal price marketization, after the contract price increased by 40 yuan/ton in 2007, the planned coal price is still about 40 yuan/ton lower than the market price,

In the future, it is expected to be gradually upgraded to be fully integrated. In the future, the national steam coal market will be more dependent on: Datong Daqin Railway -- Qinhuangdao Port, the supply chain, Datong Coal Industry Rely on the Group's integration of resources in Datong and even northern Shanxi to control the voice of the national steam coal price

Tashan Coal Mine was completed and put into operation, making the output of the company reach 25 million tons in 2008, more than double the current output

It is expected to continue to acquire coal mines of the Group in the future. The prospect of capacity and resource expansion is promising for a long time, and it is expected to become the leader of the hundred million ton industry

It is estimated that earnings per share from 2006 to 2008 will be 0.54 yuan, 0.79 yuan and 1.09 yuan respectively, and the current share price is equivalent to 14.3x earnings per share in 2007

As the leader of the domestic steam coal industry, we believe that it is reasonable to give 20 times of 2007's P/E ratio. Therefore, we raised the 12-month target price to 15.8 yuan, with 40.3% upside compared with the current stock price, and maintained the "overweight" investment rating.