Guoyuan International: Giving Shougang Resources (00639) a “buy” rating, coking coal resources are blessed with high dividends to highlight value

The Zhitong Finance App learned that Guoyuan International released a research report saying that it gave Shougang Resources (00639) a purchase rating, with a target price of HK$3.52. The company has three high-quality coking coal mines in Liulin, Xingwu, Jinjiazhuang, and Zhaiyadi in Shanxi. The coking coal produced is scarce “panda coal”. The balance between supply and demand in 2026 is compounded by stricter safety supervision. The price of coking coal may return to a reasonable center and be upward elastic, helping profits continue to recover. The company is financially stable, has no interest-bearing liabilities, and has high dividend payouts and medium- to long-term investment value.

Guoyuan International's main views are as follows:

Coking coal is blessed with abundant resources, and the quality of coal is superior

The company has three coking coal mines in Liulin County, Shanxi Province, China. The approved production capacity of the company's three coal mines is 1.75 million tons/year, for a total of 5.25 million tons/year. All three mines are equipped with three Kengkou coal processing plants and independent coal washing plants. The total washing capacity of the three coal washing plants is 6.3 million tons/year. The company's Ida is located in the Liliu mining area of the Hedong Coalfield. This area is one of the main reserves of high-quality hard coking coal in China. The coking coal produced is known as “panda coal” due to its scarcity and high economic value. Furthermore, the company is actively promoting the approval process for exploration and conversion of Lianshan Coal Chemical's Guojiagou coal mine. Once approved and put into operation, it will effectively solve the company's long-term resource continuity problems and open up new growth space.

Coking coal prices returned to a reasonable center in 2026, and the company's profit recovered year-on-year

After the company's coal mine gradually switched to coal formation, it currently mainly uses the No. 8 and No. 9 coal seams, which is the benchmark for the Liulin No. 9 coal truck plate price. In the first half of 2025, the overall average sales price of the company's refined coking coal (including tax) fell 45% year-on-year to 1,067 yuan/ton. Judging from the target plate price of the Liulin No. 9 coal truck, the low in June was 970 yuan/ton; it rebounded to a high of 1,490 yuan/ton in mid-November 2025. Currently, the latest price is 1,290 yuan/ton. The company's profit is expected to improve in the second half of the year as prices bottomed out and rebounded in Q3. Looking ahead to 2026, it is expected that the overall balance between coking coal supply and demand is expected. In a situation where domestic production is overproduction and safety inspections are getting stricter, there may be phased supply tightness, leading to upward price elasticity, which is beneficial to the continued recovery of the company's profits.

The company's financial stability, abundant cash flow, and high dividends highlight medium- to long-term value

The company has no interest-bearing liabilities, stable finances, and abundant cash flow. As of the end of June 2025, the company's bank balance and cash (including time deposits over 3 months) reached HK$9.456 billion, and sufficient cash flow effectively guaranteed the company to maintain a high dividend rate and return to shareholders. The company promises a guaranteed dividend rate of 40%, but the actual dividend rate has averaged around 80% in recent years. Although the company's profit declined in 2024, the company's dividend payout rate reached 100%, which is at the highest level in the industry. In 2025, the company paid HK6 cents in the interim, with a dividend rate of about 76%. In 2026, the company's dynamic dividend rate of about 5.7% is attractive, showing medium- to long-term investment value.