[ET Net News Agency, 2 September 2019] Goldman Sachs initiated coverage on China
Shenhua Energy (01088) with a "buy" rating and target price of HK$21.5.
The research house said the future of coal is clouded, with competing forces working
against its long-term demand outlook. Goldman believes these risks would translate into a
deep discount on valuations of Shenhua, versus its past trading history.
Nevertheless, it sees value in the stock. Goldman estimated the current share price
implies more than 50% discount from a fair valuation derived based on a historical
discount rate of the stock.
It expects Shenhua's strong cash flow generation to continue in the coming years,
underpinned by its low-cost position and visibility provided by its high proportion of
contract sales. It expects Shenhua to deliver stable earnings at EPS of Rmb2.22-2.28 in
2019-21, with coal price assumption of QHD5500 spot at Rmb580-605/t (with VAT). (KL)