September 2, 2011 (Yosua Nainggolan) Major players in the Chinese coal industry include the State Council ran China National Coal Group Corporation (HKG:1898), and the world’s largest coal producing company China Shenhua Group (HKG:1088). Together with Yanzhou Coal Mining (NYSE:YZC), they make up approximately 90% of the coal market capitalization of China.
Yanzhou Coal’s biggest competitor, China Shenhua Energy Co Ltd. (HKG:1088) has also been doing well in the past 5 years. The company is bigger and older than Yanzhou Coal (HKG:1171) or China Shenhua Energy (HKG:1088) and as a result of that, it has achieved a less dramatic increase in Total Assets. During the last five years, China Shenhua Energy’s Total Assets almost doubled from RMB172,360 million to RMB340,860 million, with an average annual growth rate of 19%. Although net income growth is slightly lagging behind revenue growth, the company is still showing signs of healthy growth, especially in its average annual cash growth of 68%. China Shenhua Energy (HKG:1088) is currently looking to acquire a 40% stake in the western Tsankhi block of Mongolia’s Tavan Tolgoi coal, one of the world’s biggest coking coal deposits. China Shenhua Energy (HKG:1088) will be sharing the project with a Russian-led consortium (36%) and US mining giant Peabody Energy (NYSE:BTU) (24%). Although there are currently many complaints by Japanese and Korean firms concerning the bidding process to this project, the Tavan Tolgoi coal project will be a major profit-generator for any entity controlling it.
China Shenhua Energy (HKG:1088) Financial Performance
Like Yanzhou Coal Mining (NYSE:YZC) and China Shenhua Energy (HKG:1088), China Coal Energy Co Ltd (HKG:1898) has also experienced remarkable growth in the last 5 years. Total Assets almost tripled from RMB45,113.7 million in 2006 to RMB122,936 million in 2010, with an average annual growth rate of 31%. Like Yanzhou Coal (NYSE:YZC), China Coal (HKG:1898) seems to be able to manage operations well. The company recorded an average annual revenue growth of 25% that is paired with a 28% average annual net income growth. From a cash perspective, China Coal (HKG:1898) has been increasing its cash balances at a rate of 37% on average annually, from as low as only RMB 4,278 million in 2007 to RMB22,922 million by 2010. Looking deeper into the latest financial statement of the company, investors realize that a considerable amount of these cash increase is caused by an RMB18,190 million decrease in placement of term deposits. The company may be looking to gather enough cash for a major expansion, much like those done by competitors.
China Coal (HKG:1898) Financial Performance
Total Assets increasing from RMB23,458.70 million to RMB72,755.90 million in merely 5 years in certainly something Yanzhou Coal Mining (NYSE:YZC) should be proud of. Through a series of major acquisitions of mining complexes all around the country, Yanzhou Coal (NYSE:YZC) more than doubled its size and income, enjoying an average Total Asset growth of 36% annually. The company doesn't seem to be slowing down anytime soon. Just lately Yanzhou purchased two Australian coal producers, Syntech Holdings Pty Ltd and Syntech Holdings II Pty Ltd for $222.08 million in cash. This transaction is similar to a number of Yanzhou Coal’s past deals which utilize mostly cash. The effect of this pattern can be seen in Yanzhou Coal’s relatively low annual cash balance, which in 2010 fell below Net Income. Yanzhou Coal Mining (NYSE:YZC) has been relatively efficient in managing expenses, evident by the steady growth rate of their Net Income as compared to Revenue. Looking at P/E ratios, Reuters.com has the industry average at 22.57 with Yanzhou Coal (NYSE:YZC), China Shenhua Energy (HKG:1088), and China Coal Energy (HKG:1898) at 12.61, 16.52, and 16.48 respectively. Yanzhou Coal Mining co. Ltd. (NYSE:YZC) seems to be valued low relative to its competitors. However, with its strong finances and great expansion potential, Yanzhou Coal Mining (NYSE:YZC) may be a highly profitable investment.
Yanzhou Coal (NYSE:YZC) Financial Performance
After analyzing each company’s growth characteristics, it becomes obvious that all three companies are going through promising growth phases. All these coal miners should be considered by investors looking to ride along the Chinese coal industry boom. Yanzhou Coal Mining (NYSE:YZC) has been the fastest growing among them a trend that may continue to the near future.
Below is a financial performance summary for all three companies.