The coal stock investment is mainly to obtain PE rising income, so it is extremely important to pay attention to the coal stock PE. In 11 years, the fundamentals of the coal industry were better than expected, and the coal price was stable and medium-term. Based on this expectation, the coal stocks PE can be seen to be more than 20 times, and there is still much room for growth. Maintain industry "recommended" rating.

Discussion on Coal Valuation.

For the coal cyclical industry, most of our investment is mainly to obtain the gains from the P/E rise, while the EPS rises relatively slowly, or basically we can roughly predict the current year's earnings per share. Therefore, research on investment in coal stocks P/E appears to be more important than EPS.

In past reports, we present historical experience data for coal stocks P/E: When coal prices are expected to fall, coal stocks see 10 times below dynamic P/E; coal prices are expected to stabilize when coal stocks are 15-20 times dynamic P/E. Inter-temporal volatility; coal price is expected to rise, coal stocks see above 20 times dynamic P/E.

Current valuation judgment: The coal valuation can be seen 20 times P/E next year.

Next year, the fundamentals of coal are better than expected, and the coal price is stable and medium-term: supply side: The railway bottleneck restricts the effective supply of coal, and the coal market is divided into regions. This is extremely beneficial to coal enterprises that have the advantage of railway transportation. Demand side: In the first year of the 12th Five-Year Plan, all regions will propose exciting plans and do not rule out the possibility of large-scale construction projects (Shanxi Province proposed to double the GDP of the 12th Five-Year Plan, and the fixed asset investment is 5 trillion yuan, an increase of 150 over the 11th five-year plan. %).

With coal prices expected to remain steady and bullish, coal stocks can see 20 times dynamic P/E: Since our valuation involves a cross-year, ie within the next 6 months, coal stocks can be optimistic about the 11-year dynamics. 20 times P/E (the current 11-year average dynamic P/E is about 16 times, with about 25% of space).

Investment Strategy:

The peak season is approaching. The coal market next year is better than expected. Coal prices are expected to remain steady and bullish, and continue to maintain the industry's recommended investment rating. Valuation is divided into three steps: the first step, first see 10 times 20 times P/E (basically achieved); the second step, see 11 years 20 times P/E (currently 11 years average dynamic P/E About 16 times, there is still about 25% of space); The third step, whether to look at more than 20 times P/E, depending on the situation behind the rise in coal prices.

Company selection: Select two types of companies in Baima: focus on the listed companies with PEG<=1: Shanmei International, Lanzhou Kechuang, Xishan Coal & Power, Panjiang Stock, SDIC Xinji. The assets are expected to be injected into the company: Shanxi Coal International, Guoyang Xineng, Datong Coal, Lu'an Huaneng, and Kailuan shares. In the dark horse, two companies were selected: coal gasification, Taigong Tiancheng.