Yanzhou Coal Mining (1171): Set to benefit from domestic shortage

China Electricity Council said this year could be the most tightened one for the Chinese coal market since 2016.

Uptrend 2

China Electricity Council said China's north east region may be facing a 37 million tons thermal coal shortage, and this year could be the most tightened one for the coal market since 2016.

Yanzhou Coal Mining (1171.hk), a major Chinese coal producer, reported last month that 3Q saleable coal production increased 20.0% on year to 26.86 million tons, up from 8.8% in 2Q and 4.4% in 1Q. It is worth to notice that sales volume rose 26.1% to 36.19 million tons, the third consecutive quarter that sales growth has exceeded 20.0%, suggesting robust demand.

The company said last month that it plans to increase its 2020-2024 cash dividend ratio, with total cash dividends in each fiscal year accounting for approximately 50% of its net profit for the year after deducting statutory reserves, and the cash dividend per share shall not be less than 0.50 yuan (nearly 10% dividend yield at current share price level).

From a technical point of view, Yanzhou Coal Mining (1171.hk) is gathering more upside momentum as shown on the daily chart. It has broken above a bearish channel drawn from July, while the 20-day moving average has crossed above the 50-day one. The level at $5.70 might be considered as the nearest support, while the 1st and 2nd resistance are expected to be located at $6.55 and $7.00 respectively.

Source: GAIN Capital, TradingView

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