2007-9-17 01:16:00 p.m. HKT, XFNA
China Coal Energy shares rise after H1 net profit doubles
HONG KONG (Thomson Financial) - Shares of China Coal Energy Co jumped Monday after the nation's second-biggest coal producer by sales reported that its net profit nearly doubled in the first half.
China Coal said late Sunday that net profit for the six months ended June surged to 2.65 billion yuan from 1.33 billion yuan in the same period last year, thanks to higher sales and reduced costs. Sales rose 14 percent to 16.7 billion yuan.
""China Coal's interim results were ahead of expectations,"" said Donovan Huang, an analyst at Nomura International (HK) Ltd, who has a ""buy"" recommendation on the stock.
The stock rose 36 cents or 2 percent to 17.28 Hong Kong dollars at the close of the morning trade.
China's soaring economy has increased demand for coal, boosting profits at China Coal and other energy suppliers. Coal accounts for 70 percent of primary energy consumption in China, the world's biggest producer and consumer of coal
The Chinese economy grew 11.9 percent in the second quarter from a year ago, the fastest pace in 12 years.
IPO outlook upbeat
""In the first half of 2007, the economy of China continued to maintain a rapid momentum, with a stable growth of energy supply and demand. China Coal Energy firmly seized the opportunity of the continued growth of demand in the coal market, striving to increase the coal production volume,"" China Coal said in a statement.
The World Bank predicted that China's gross domestic product will expand 11.3 percent this year, up from an estimate of 10.4 percent announced in May.
China Coal's first-half profit represents 51 percent of Nomura's full-year estimate of 5.2 billion yuan, Huang said. Nomura is reviewing its full-year earnings forecast for the company.
""We continue to like China Coal due to its volume growth, which is the strongest among our Chinese coal coverage, as it is highly leveraged to the ongoing coal cycle which has shown clear signs of fundamentals breaking out,"" Goldman Sachs said in a report.
China Coal's self-produced raw coal output rose 26 percent in the first half.
Established in August 2006 and listed in Hong Kong in December of the same year, China Coal said earlier this month that it plans to sell 1.5 billion shares in the mainland this year. Based on Monday's midday closing price of 17.28 dollars, China Coal could raise as much as 26 billion dollars from its planned initial share sale in the mainland.
Proceeds from the share sale will fund expansion projects, particularly in its coal mining operation, which contributes about 72 percent of its total revenue. As of end-June, China Coal has 17 ongoing projects worth 8.3 billion yuan.
""Response to its initial public offering in China will be very good. Coal prices are going up and demand is stronger than expected,"" Nomura's Donovan said.
Nomura expects coal prices to go up in the next three years.
China Coal derives most of its revenue from domestic consumers, accounting for 83 percent of total sales in the first half. Exports to Japan, Taiwan and Korea account for about 17 percent.