＜Research＞Daiwa Upgrades CHINA SHENHUA (01088.HK) to Outperform; TP Hiked to $40

　　Daiwa noted in a report that it downgraded CHINA SHENHUA (01088.HK) +0.150 (+0.404%) Short selling $291.35M; Ratio 29.115% in March this year due to the declining trend of its coal production and average selling price (ASP). However, with the theme of state-owned enterprise investment coming back into focus now, coupled with the company's output continuing to outperform its guidance and the ASP trend of its products stabilising, the broker has upgraded SHENHUA's H-share rating from Hold to Outperform, with a target price hike from $28 to $40.

　　Daiwa said although SHENHUA's 2024 forecasted dividend yield has dropped from 9% to 6.6%, it is still an attractive level compared with other state-owned enterprises with higher yields. SHENHUA is also expected to announce its interim results in mid to late July, which the broker believed could be a catalyst in the near term.

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　　SHENHUA's coal production in the first five months of this year rose 2.3% YoY to 136 million tonnes, consistently exceeding its production target. Meanwhile, coal prices in 2Q24 rebounded from around RMB800 to over RMB850 per tonne, which Daiwa believed would further boost market confidence. Accordingly, Daiwa lifted its coal production forecast on SHENHUA by 2-4% to 325 million, 328 million and 335 million tonnes for 2024/25/26, while raising its ASP forecast by 1% to RMB572 per tonne for the 3 years.

　　(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2024-07-02 16:25.)

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