MS China Coal

2013 7 8
2013 2013
GDP 15 14.6% 20.9%
2013 5.3% 4.4% 2.7 3.05
2013 4 1/4
6% 56%
2013 4 GDP 7% 2013 4
0.89
1997
1997-1998 19981999 19982001
2002
20132015 2013
-10%-17%
2013 -5%-17%
2013-2015 20.2%/34.0%/31.9% 12
28.7%
/
///
B /H
2013
EPS 23%
72
18.26
11.64
11.45
7.55
36.40
8.55
8.79
11.54
5.26
4.83
8.63
9.03
7.82
5.14
7.89
5.70
5.65
600123.SS
601699.SS
14.94
601918.SS
8.56
3948.HK
39.64
002128.SZ
9.29
600348.SS
9.39
600546.SS
12.25
000780.SZ
5.54
900948.SS
5.08
000937.SZ
8.73
600395.SS
8.84
601101.SS
7.45
601666.SS
4.83
000983.SZ
7.32
600997.SS
4.44
601001.SS
3.51
56.9%
30.5%
13.3%
8.9%
8.7%
6.8%
6.1%
5.3%
5.2%
1.2%
-2.1%
-4.8%
-6.0%
-7.2%
-22.1%
-37.8%
BH
*20137212
EV/EBITDA
DataStream
2013 2 1
2013
2012 12 4
2012 9 24
2012 7 6
2012 5 17
2013-2015 32%
*
, CFA : S1420511010001
+86(21)2401-8948 yong.han@ghsl.cn
: S1420512030001
+86(21)2401-8945 jefferson.zhang@ghsl.cn
2013 7 8
Table of contents
Multiple factors driving coal market weakness; financial tightening causing continued demand pressure
Path to coal industry stabilization must include lower coal prices, less investment, capacity elimination
We adjust our 2013-15 coal price and earnings estimates
13
Adopting EV/EBITDA framework; Buy Lanhua/Luan/SDIC; Pingdingshan/Jizhong/Yitai to Neutral; Kailuan to Sell
18
Kailuan (600997.SS): Down to Sell on downward price pressure
24
Yitai B/H (900948.SS/3948.HK): Down to Neutral on outperformance
26
Jizhong (000937.SZ): Acquisition progress unlikely; down to Neutral
30
Pingdingshan (601666.SS): Pessimism looks priced in; up to Neutral
33
Disclosure Appendix
37
Unless otherwise mentioned, all prices in this report are as of market close July 2, 2013.
The author would like to thank Rory Wang for her contribution to this report.
2013 7 8
Exhibit 1: Valuation summary for global coal companies under GS/GH coverage
Ticker
EPS
GS/GH
2-Jul-13
Rating
Price
Ccy
12M TP
P/E (X)
2013E
2014E
22.70
2.01
1.93
8.4
4.90
0.44
0.32
11.3
CNY
18.26
1.40
1.66
8.3
China-A/B share
Shenhua (A)
601088.SS
Buy
16.93
CNY
China Coal (A)
601898.SS
Neutral
4.93
CNY
Lanhua Sci-Tech
600123.SS
Buy*
11.64
2013E 2014E
P/B (X)
EV/EBITDA (X)
ROE
2013E
2014E
2013E
2014E
2013E
2014E
8.8
1.2
1.1
5.4
5.7
15%
13%
15.3
0.7
0.7
8.2
9.3
7%
5%
7.0
1.3
1.1
4.8
3.6
16%
17%
11%
Lu'an Energy
601699.SS
Buy
11.45
CNY
14.94
0.84
0.85
13.7
13.5
1.5
1.4
4.8
4.3
12%
SDIC Xinji
601918.SS
Buy
7.55
CNY
8.56
0.48
0.51
15.6
14.7
1.5
1.4
7.7
7.2
10%
10%
Yitai Coal (B)
900948.SS
Neutral
4.83
USD
5.08
2.85
3.00
10.4
9.9
2.2
1.9
6.6
6.2
22%
20%
15%
Huolinhe Coal
002128.SZ
Neutral
8.55
CNY
9.29
0.89
0.77
9.6
11.1
1.7
1.5
7.0
7.3
19%
Yangquan Coal
600348.SS
Neutral
8.79
CNY
9.39
0.72
0.63
12.2
14.1
1.5
1.4
5.0
5.0
13%
10%
SCIE
600546.SS
Neutral
11.54
CNY
12.25
0.90
1.15
12.9
10.0
1.3
1.2
6.3
5.6
11%
13%
Pingzhuang Energy
000780.SZ
Neutral
5.26
CNY
5.54
0.23
0.15
23.1
34.5
1.1
1.1
5.5
6.1
5%
3%
Jizhong Energy
000937.SZ
Neutral
8.63
CNY
8.73
0.73
0.64
11.9
13.4
1.2
1.2
5.3
5.2
11%
9%
Panjiang
600395.SS
Neutral
9.03
CNY
8.84
0.52
0.62
17.3
14.7
1.9
1.8
9.2
8.2
11%
13%
Haohua Energy
601101.SS
Neutral
7.82
CNY
7.45
0.60
0.45
13.0
17.2
1.3
1.2
7.5
8.6
10%
7%
Pingdingshan Coal
601666.SS
Neutral
5.14
CNY
4.83
0.22
0.13
23.1
39.5
1.1
1.1
5.1
5.7
5%
3%
Xishan Coal
000983.SZ
Neutral
7.89
CNY
7.32
0.32
0.22
24.8
36.4
1.6
1.5
6.7
7.1
6%
4%
24.3
28.5
Kailuan Energy
600997.SS
Sell
5.70
CNY
4.44
0.23
0.20
Datong Coal
601001.SS
Sell
5.65
CNY
3.51
(0.26)
(0.39)
Yanzhou (A)
600188.SS
Sell
9.41
CNY
7.90
0.07
0.23
Median-A/B share coal companies
1.0
1.0
7.7
8.0
4%
3%
1.1
1.2
7.9
10.1
-5%
-8%
133.2
40.4
1.0
1.0
9.1
9.4
1%
2%
13.0
14.7
1.3
1.2
6.7
6.6
10%
9%
HK-H share
Shenhua (H)
1088.HK
Buy
19.56
HKD
23.90
2.53
2.44
7.7
8.0
1.1
1.0
5.0
5.3
15%
13%
Yitai Coal (H)
3948.HK
Neutral
36.40
HKD
39.64
3.56
3.76
10.1
9.7
2.1
1.8
6.5
6.1
22%
20%
Shougang Resources
0639.HK
Neutral
2.82
HKD
2.30
0.19
0.16
15.0
17.1
0.8
0.8
6.3
6.8
5%
4%
7.1
9.8
5%
China Coal (H)
1898.HK
Neutral
3.95
HKD
4.10
0.55
0.40
0.5
0.4
6.6
7.8
7%
Mongolian Mining Corp
0975.HK
Sell
1.55
HKD
1.00
(0.19)
0.01
1.1
1.1
55.6
11.2
-13%
1%
Hidili
1393.HK
Sell
1.40
HKD
1.00
(0.11)
(0.11)
0.3
0.3
19.8
16.1
-2%
-3%
Yanzhou (H)
1171.HK
Sell*
5.55
HKD
4.40
0.09
0.30
Median-H share coal companies

US
Consol Energy
CNX
Neutral
27.12
USD
37.00
1.46
2.19
Peabody Energy
BTU
Neutral
14.86
USD
22.00
(0.18)
0.96
Alpha Natural Resources
ANR
Sell
5.33
USD
5.00
(2.23)
(1.68)
Arch Coal
ACI
Neutral
3.69
USD
5.00
(1.27)
(0.35)
Walter Energy
WLT
Sell
10.79
USD
13.00
(1.72)
0.49
61.9
18.8
0.5
0.5
6.4
6.7
1%
2%
10.1
9.8
0.8
0.8
6.5
6.8
0.1
0.0
11%
18.6
18.6
Median-US coal companies
12.4
1.5
1.3
7.4
6.3
7%
15.5
0.8
0.8
7.6
5.5
-1%
5%
0.3
0.3
7.8
5.4
-11%
-9%
-3%
0.3
0.3
10.5
6.4
-10%
21.8
0.8
0.8
11.7
5.8
-13%
4%
15.5
0.8
0.8
7.8
5.8
-10%
4%
Indonesia
Banpu Public Company
BANP.BK
Buy
241
THB
410
1.09
1.28
7.1
6.1
0.8
0.7
5.9
5.2
11%
12%
Harum Energy
HRUM.JK
Buy
3,100
IDR
5,100
0.04
0.05
7.4
6.0
2.2
2.1
3.1
2.3
32%
36%
Bumi Resources
BUMI.JK
Sell*
520
IDR
480
0.00
0.01
12.8
7.2
4.8
3.1
6.9
6.0
45%
52%
PT Adaro Energy
ADRO.JK
Neutral
800
IDR
1,050
0.01
0.01
9.2
9.1
0.9
0.9
5.2
5.1
11%
10%
Tambang Batubara Bukit Asam
PTBA.JK
Sell
13,200
IDR
11,000
976.50
1,061.47
13.5
12.4
3.0
2.5
9.0
7.9
24%
22%
Australia
Rio Tinto plc
RIO.L
Sell*
2,694
GBP
2,715
5.18
4.74
7.9
8.6
1.4
1.3
5.8
6.2
19%
16%
India
Coal India Ltd.
COAL.BO
300
INR
375
29.17
34.30
10.3
8.7
3.9
3.3
5.5
4.5
37%
35%
Neutral
*Indicates the stock is on our regional Conviction List.

Target prices of US coal stocks are based on a 6-month timeframe. PT Adaro EPS estimates are in USD. Coal India fiscal year ends in March.
Source: Datastream, Goldman Sachs Research estimates, Gao Hua Securities Research estimates.
2013 7 8
Multiple factors driving coal market weakness; financial tightening

causing continued demand pressure
Economic slowdown, rapid hydropower growth and increased coal imports are
leading to weaker coal prices
Macroeconomic recovery slowing down. May sequential industrial production growth
rebounded, but yoy growth was down slightly. CPI and PPI both fell, contrary to market
expectations. Liquidity also tightened somewhat, which has put downward pressure on the shortterm economic growth outlook. Macroeconomic recovery has slowed, limiting the coal demand
rebound.
Exhibit 3: CPI and PPI both fell (yoy)
Exhibit 2: China PMI index
CPI
China's PMI
65
10%
60
8%
55
6%
50
PPI
4%
45
2%
40
0%
May-13
Mar-13
Jan-13
Nov-12
Sep-12
Jul-12
May-12
Mar-12
Jan-12
Nov-11
Sep-11
Jul-11
May-11
Mar-11
Jan-11
Nov-10
Sep-10
Jul-10
Jun-13
Feb-13
Oct-12
Jun-12
Feb-12
Oct-11
Jun-11
Feb-11
Oct-10
Jun-10
Feb-10
Oct-09
Jun-09
Feb-09
Oct-08
Jun-08
Feb-08
Oct-07
Jun-07
Feb-07
-4%
May-10
30
Mar-10
-2%
Jan-10
35
-6%
Source: Bloomberg.
Source: CEIC.
Rapid hydropower growth has limited thermal power demand. Water has been relatively
abundant, leading to yoy Jan-May hydropower generation growth of 14.6% (1.4% in May), while
yoy thermal power generation growth was just 2.1% (3.7% in May). With thermal power
generation growth remaining low, pressure from hydropower substitution is putting pressure on
thermal coal demand.
Exhibit 4: Recent pressure on thermal power from hydropower should continue
Hydro power generation ytd yoy
Thermal power generation ytd yoy
40.0
32.9
30.0
23.2
20.0
14.6
13.9
6.8
10.0
0.0
May-13
Mar-13
Jan-13
Nov-12
Sep-12
Jul-12
May-12
-13.9
Mar-12
Jan-12
Nov-11
Sep-11
Jul-11
-20.0
May-11
Mar-11
-10.0
2.1
-0.2
-1.2
Source: CEIC.
2013 7 8
Exhibit 6: Thermal and hydro power installed capacity

yoy growth
Exhibit 5: Installed capacity by energy type
Thermal
Hydro
Wind
Natural gas
Nuclear
Solar
Others
Thermal power new capacity ytd yoy

Hydro power new capacity ytd yoy
100%
90%
300%
80%
250%
70%
200%
60%
50%
150%
40%
100%
30%
50%
20%
May-13
Mar-13
Jan-13
Nov-12
Sep-12
Jul-12
Source: China Electricity Council.
May-12
(100%)
Mar-12
2012
Jan-12
2011
Nov-11
2010
Sep-11
2009
Jul-11
2008
May-11
2007
Mar-11
2006
Jan-11
2005
Nov-10
0%
Sep-10
(50%)
Jul-10
10%
Source: China Electricity Council.
Power plant demand remains weak. As of June 20, 2013, inventory at major Chinese power
plants was 74.78mt (22 days, vs. 18 days in January). Average daily consumption had fallen to
3.3mt, a drop of 29.6% from Januarys 4.27mt. Even though the summer electricity consumption
peak is approaching, power plant purchasing remains weak (there were only 31 waiting ships at
Qinhuangdao port on July 1, 2013, vs. approximately 100 under normal conditions).
Exhibit 8: Coal consumption at major power producers
continued to decline
Exhibit 7: Coal inventories at major power producers

remained at high level
mt
Coalinventoryinmajorpowerplants
100
days
35
Inventorydays(RHS)
30
80
mt
5
Coalconsumptionofmajorpower
plants
25
60
20
40
15
10
20
0
Jun09
5
0
Feb10
Source: SXCoal.
Oct10
Jun11
Feb12
Oct12
Jun13
1
0
Jun09
Feb10
Oct10
Jun11
Feb12
Oct12
Jun13
Source: SXCoal.
Significant increase in coal imports. In 2012, China imported 289mt of coal, +30% yoy. From
January-May of this year, China imported 136mt of coal, + 21% yoy, which had a severe impact
on the already-weak Chinese domestic coal market. We raise our 2013 coal import volume
estimate to 305mt from 270mt (assuming Jan-May average monthly imports of 27mt hold steady
in June and July, and fall by 4mt to 23mt starting in August due to weak demand and possible
import limit policies).
2013 7 8
Exhibit 9: Coal import volume is rapidly increasing
Monthlycoalimport
mt
Exhibit 10: The difference between domestic and foreign

coking coal price continues to widen
yoy
Rmb/t
Pricedifference(RHS)
DomesticcokingcoalCIF
QueenslandcokingcoalCIF
Rmb/t
250%
2900
200%
2600
900
150%
2300
700
100%
2000
500
14
50%
1700
0%
1400
34
29
24
19
4
Sep10
May11
Jan12
Sep12
50%
May13
Source: CEIC.
1100
300
100
100
300
1100
Jun11 Oct11 Feb12 Jun12 Oct12 Feb13 Jun13
Source: SXCoal, McCloskey.
Policies affecting coal imports remain uncertain. The Temporary Provisions on Salable
Coal Quality (Draft for Comments) issued by the National Energy Administration sets standards
for long-distance transported and imported coal: lignite must have sulfur content of less than 1%,
ash content of less than 20%, and calorific value of at least 3,941 kcal/kg; bituminous and
anthracite coal must have sulfur content of less than 2%, ash content of less than 30%, and
calorific value of at least 4,300 kcal/kg and 5,001kcal/kg respectively. This policy is still in the
comment phase, and it faces opposition from the five major power producers. Even if the policy is
enacted, we do not expect oversupply in the domestic coal market to fundamentally improve; only
gradual capacity reduction will help the long-term healthy development of the coal industry, in our
view.
Coal prices continue to face downward pressure

Some coal firms facing losses are beginning to cut production. In January-April 2013,
one quarter of coal firms realized losses (including Datong Coal Mine Group and a number of
private coal mines in Inner Mongolia), and the Shanxi coal rail volume was down 9% yoy in the
first four months of the year. This is starting to be reflected in the supply side, with May raw coal
production of 295mt, down 6.3% yoy, and Jan-May coal production of 1.47bt, down 2.8% yoy.
Over the same period, Inner Mongolia coal production declined 10.0%, with small-scale town and
village mine production down 56%.
Exhibit 12: Coal sales by rail shipments fell sharply in
Shanxi
Exhibit 11: About 25% of coal firms are operating at a

loss
Companies with losses
Companies with profits
mt
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Shanxidailyaveragecoalsalesviarailway
yoy(RHS)
1.5
90%
1.3
70%
1.1
50%
30%
0.9
10%
Source: CEIC.
Apr-13
Feb-13
Oct-12
Dec-12
Aug-12
Apr-12
Jun-12
Feb-12
Dec-11
Oct-11
Jun-11
Aug-11
Apr-11
Feb-11
Dec-10
0.7
0.5
Dec09 Aug10
10%
Apr11
Dec11 Aug12
30%
Apr13
Source: SXCoal
2013 7 8
Chinas macro economy continues to face downward pressure. On June 24, the Goldman
Sachs ECS team downgraded its China GDP growth estimates on signs of cyclical weakness and
recent financial tightening. Its current GDP growth estimates are 7.4% for 2013 (originally 7.8%),
and 7.7% for 2014 (originally 8.4%). GDP growth is estimated to fall to 7.0% in 4Q from 7.7% in
1Q, and industrial production growth is expected to fall to 8.6% from 9.6%.
Exhibit 13: China quarterly GDP growth is expected to
trend down (yoy)
China quarterly GDP growth
China quarterly IP growth
%
25.0
15.0
12.5
Exhibit 14: IP is also under downward pressure (yoy)
13.8
12.6
10.0
8.9
10.6
9.6
7.5
5.0
20.0
11.9
14.4
14.8
7.3
13.8
13.3
10.0 9.4
10.0
7.0
6.5
15.9
15.0
7.9
19.6
18.2
9.1
0.0
8.6
5.1
5.0
2.5
0.0
Source: Goldman Sachs Research estimates.
AUD depreciation could also lead to lower costs for international coal suppliers.
According to Goldman Sachs ECS estimates, the AUD/USD exchange rate will fall from the
current 0.92 to 0.89 in 4Q13, and may fall further, reaching 0.80 by 2015.
Exhibit 15: We expect AUD to continue to depreciate
AUD/USD exchange rate

1.10
1.06
1.00
0.94
0.90
0.80
1.04
1.01
0.91
0.88
0.89
0.74
0.70
0.66
0.60
0.50
0.40
2013 7 8
Path to coal industry stabilization must include lower coal prices,

less investment, capacity elimination
Supply pressures remain high; changing energy structure is long-term trend
Chinese coal industry still faces supply growth pressures. New coal industry production
capacity in 2011 totaled 413mt, with 901mt under construction at the end of that year. Based on
FAI in recent years, we estimate average new capacity added over the past several years has
been approximately 400mt; taking out scrapping of older mines and closing of small-scale mines,
we estimate net capacity added at around 300mt, while coal demand has only grown at less than
200mt/year. As rail shipping bottlenecks are gradually resolved, this new capacity will become
oversupply, putting pressure on the coal market.
Exhibit 16: China still has significant capacity under construction (mt)
Increased capacity this Capacity under construction at
year
the end of the year
Capacity under
construction this year
New start this year
2004
436
270
116
320
2005
757
410
184
573
2006
953
394
226
726
2007
1,097
433
270
828
2008
895
340
231
664
2009
1,010
482
320
690
2010
1,377
574
387
990
2011
1,314
607
413
901
Source: 2005-2012 China Statistical Yearbook, Gao Hua Securities Research.
Chinas increased focus on environmental issues should limit coal consumption.

According to the Energy Development Plan for the 12th Five-Year Plan, total China energy
consumption in 2010 was 3.25bn TCE (ton of coal equivalent), an average yearly increase of
6.6% during the 11th Five-Year Plan. The plans target for 2015 is 4bn TCE, representing
average yearly consumption growth of 4.3% during the 12th Five-Year Plan, with coal declining
from 68% of energy consumption in 2010 to 65% in 2015. On June 14, 2013, Premier Li Keqiang
convened an executive meeting of the State Council. The State Council promulgated 10 air
pollution control measures, including renovation of small coal-fired boilers, production limits on
high-consumption, high-pollution industries, and completing elimination of obsolete capacities in
the steel, cement, aluminum and plate glass industries one year ahead of schedule.
2013 7 8
Exhibit 17: Energy development in the 11th Five-Year

Plan
Energy development plan for 12th Five-year
Energy consumption pattern in 11th Five-year

2005
2010
Primary energy - production
bn TCE
2.16
2.97
Coal
bn tonne
2.35
3.24
Crude oil
mn tonne
180
200
3
Natural gas
49.3
94.8
bn m
CAGR
6.6%
6.6%
2.1%
14.0%
Non-fossil energy
Primary energy - consumption
Power generation - installed capacity
Hydro
Thermal
Nuclear
Wind
11.8%
6.6%
13.3%
12.9%
12.7%
9.6%
89.8%
mn TCE
bn TCE
mn kw
mn kw
mn kw
mn kw
mn kw
160
2.36
520
120
390
6.85
1.26
280
3.25
970
220
710
10.82
31.00
Exhibit 18: Key energy development targets for the 12th

Five-Year Plan
2010
3.25
8.6
4.2
81
2.97
3.24
200
94.8
970
660
220
Primary energy
bn TCE
Energy:
% non-fossil
%
Demand and
Power consumption trn kwh
efficiency
GDP energy intensity TCE per mn Rmb
Primary energy
bn TCE
Coal
bn tonne
Energy: Supply
Crude oil
mn tonne
Natural gas
bn m3
Installed capacity
mn kw
Power generation
Coal-fired
mn kw
Hydro
mn kw
Environment
Unit GDP carbon
protection
emission
2015
4.00
11.4
6.15
68
3.66
4.10
200
156.5
1,490
960
290
CAGR
4.3%
{2.8}
8.0%
{-16%}
4.3%
4.8%
0.0%
10.5%
9.0%
7.8%
5.7%
{-17%}
Improvement of Per capita household

kwh
social well being power consumption
380
620
10.3%
Note: {} indicates data of 5-year accumulated

Source: Energy Development Plan for the 12th Five-Year Plan.
Source: Energy Development Plan for the 12th Five-Year Plan.
Exhibit 19: Energy consumption structure in China
Exhibit 20: Coal consumption can hardly resume high

growth of last 10 years
Coal
Petroleum
Natural gas
Hydro/wind/nuclear
2.0
Coal consumption elasticity
Average elasticity
100%
90%
1.5
80%
70%
1.0
60%
50%
0.5
40%
30%
20%
0.0
2013E
2011
2009
2007
2005
2003
2001
1999
1997
1995
1993
1991
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
Source: IEA.
-0.5
1989
0%
1987
10%
Source: Wind, Gao Hua Securities Research estimates.
Judging by US industry development experience, changes in energy structure are a

long-term trend. US fossil fuel consumption as a percentage of total energy consumption fell
from 85.6% in 1990 to 82.1% in 2011; coal consumption fell from 22.7% in 1990 to 20.2% in 2011;
and petroleum consumption fell from 39.7% in 1990 to 36.3% in 2011. Only natural gas
consumption increased, from 23.2% in 1990 to 25.6% in 2011, and this is largely because of the
recent increase in exploitation of shale gas and other non-traditional natural gas sources, which
has driven down gas prices, stimulating consumption.
2013 7 8
Exhibit 21: US energy consumption structure for the last

20 years
Coal
Natural gas
Petroleum
Nuclear
Exhibit 22: Changes in US power generation fuel
Renewable
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Coal
Natural gas
Nuclear
Renewable
Petroleum
60%
50%
40%
30%
20%
10%
0%
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
Source: IEA.
Source: IEA.
Learning from the 1997 financial crisis: Painful adjustments must be made,
including lower coal prices, lower profits, and decreased investment
Coal prices continue to fall. During the 1997 Asian financial crisis, coal prices remained at a
low level before finally starting to recover in 2001. During the 2008 financial crisis, China was
more severely impacted, and coal prices fell sharply. Qinhuangdao 5,500 kcal/kg coal fell 44%
from Rmb1,010/t in July 2008 to Rmb565/t in 2009. Liulin #4 coking coal prices fell from
Rmb1,605/t in September 2008 to Rmb765/t in December 2008, a 52% drop. In November 2011,
coal prices began to move downwards. Qinhuangdao 5,500 kcal/kg coal prices fell from a high of
Rmb860/t to Rmb585/t currently, a 32% drop.
Exhibit 23: Qinhuangdao 5,500 kcal/kg coal prices
continued to decline
Rmb/t
QHD 5500kcal/kg coal price
1200
Exhibit 24: Liulin coking coal prices dropped sharply
Rmb/t
Liulin #4 coking coal price
1800
1600
1400
1200
1000
800
600
400
200
0
1000
800
600
400
200
Jul-13
Nov-12
Mar-12
Jul-11
Nov-10
Mar-10
Jul-09
Nov-08
Mar-08
Jul-07
Nov-06
Mar-06
Jul-05
Nov-04
Mar-04
Jul-03
Nov-02
Mar-02
Jul-01
Nov-00
Mar-00
Jul-99
Nov-98
Source: SXCoal.
Jul-13
Nov-12
Mar-12
Jul-11
Nov-10
Mar-10
Jul-09
Nov-08
Mar-08
Jul-07
Nov-06
Mar-06
Jul-05
Nov-04
Mar-04
Jul-03
Nov-02
Mar-02
Jul-01
Nov-00
Mar-00
Jul-99
Nov-98
Source: SXCoal.
Coal production and sales volume declined. In 2012, Chinas raw coal production and
consumption yoy growth fell from 8.7%/9.8% to 4%/4.1%. The same happened during the 1997
financial crisis, with raw coal production yoy growth falling -0.7% in 1997 and -4.0% in 1998
before climbing back to 2.4% in 1999. Coal production recovered to above the 1996 level after
2001.
10
2013 7 8
Exhibit 25: Coal production fell sharply

Coal production
mt
Exhibit 26: as did coal consumption
yoy(RHS)
4,000
mt
20.0%
3,500
15.0%
Coal consumption
yoy(RHS)
4,000
20.0%
3,500
15.0%
3,000
3,000
10.0%
2,500
2,000
5.0%
1,500
0.0%
2,500
10.0%
2,000
5.0%
1,500
1,000
1,000
-5.0%
500
-10.0%
Source: Wind.
0.0%
500
-5.0%
Source: Wind.
Earnings and balance sheet of coal firms raise concerns. Coal industry profits fell sharply
in 2012 with year-on-year profit growth contracting 22%, the only negative reading in the last ten
years (except for the 6% decline in 2009). Meanwhile, the industry debt-to-asset ratio moved
higher, climbing from 59% in March 2012 to 62% in April 2013. Following the 1997 Asian financial
crisis, the coal industry suffered losses from 1998 to 1999 consecutively before turning into large
profit in 2002. The whole industry has been mired in trouble for more than four years.
Exhibit 27: China coal industry suffered losses in 19981999
Rmb bn
500
400
300
200
100
Coal sector total profits
China coal sector liability/asset ratio
ROE(RHS)
35.0%
62%
30.0%
61%
25.0%
60%
20.0%
59%
15.0%
58%
10.0%
5.0%
0
-100
Source: CEIC.
Exhibit 28: Coal industry debt to asset ratio continues to

rise
57%
56%
0.0%
-5.0%
Source: CEIC.
FAI in coal industry dropped sharply. Chinas FAI fell sharply following the 1997 Asian
financial crisis before recovering at end-1999; however, FAI in coal industry suffered a four-year
low in 1998-2001 before finally surpassing the pre-crisis level in 2003. Chinas FAI has been
steady since 2012, but FAI in coal industry plummeted with accumulated yoy growth falling to a
historical low of -13% in March 2013. As the negative impact of Rmb4 trillion worth of investment
in 2008 starts to emerge, which further complicated structural problems and lead to oversupply in
certain industries, thus a new version of Rmb4 trillion investment may not be made. We believe
coal industry needs to see its FAI declining before the industry reaches a new balance.
11
2013 7 8
Exhibit 29: Overall FAI has held steady
Exhibit 30: Coal industry FAI fell sharply in 1998-2001

Rmb bn
Coal sector infrastructure investment (completed)
70%
300
yoy(RHS)
60%
250
FAI ytd yoy
50%
200
40%
30%
150
20%
100
10%
50
Apr-97
Dec-97
Aug-98
Apr-99
Dec-99
Aug-00
Apr-01
Dec-01
Aug-02
Apr-03
Dec-03
Aug-04
Apr-05
Dec-05
Aug-06
Apr-07
Dec-07
Aug-08
Apr-09
Dec-09
Aug-10
Apr-11
Dec-11
Aug-12
Apr-13
0%
Source: Wind.
350%
300%
250%
200%
150%
100%
50%
0%
-50%
-100%
Source: China Coal Industry Year Book.
12
2013 7 8
We adjust our 2013-15 coal price and earnings estimates

We cut our coal demand growth estimates. Based on January-May 2013 conditions and the
future outlook, we lower our 2013 coal demand growth estimates from 5.3% to 4.4%, and
increase import volumes from 270mn t to 305mn t.
Exhibit 31: Overall coal supply/demand model for China
mt
2007
2008
2009
2010
2011
2012
2013E
2014E
2015E
Raw Coal production

yoy growth
Coal Net Import
2,692
6.4%
(15)
38
53
2,802
4.1%
(5)
40
45
2,975
6.2%
103
126
22
3,240
8.9%
166
185
19
3,520
8.6%
208
222
15
3,650
3.7%
280
289
9
3,862
5.8%
296
305
9
3,995
3.5%
281
290
9
4,110
2.9%
281
290
9
Balance of S-D and washing loss

Commercial Coal Supply
yoy growth
55
2,732
55
2,853
4.4%
(158)
2,920
2.4%
(229)
3,176
8.8%
(191)
3,536
11.3%
(385)
3,545
0.2%
(402)
3,755
5.9%
(418)
3,857
2.7%
(432)
3,959
2.6%
Coal Demand
yoy growth
2,727
6.9%
2,811
3.1%
2,958
5.2%
3,122
5.5%
3,430
9.8%
3,511
2.4%
3,666
4.4%
3,812
4.0%
3,938
3.3%
149
20
191
25
153
19
206
24
313
33
347
36
436
43
482
46
503
47
466
9%
725
56%
460
600
-17%
540
17%
745
24%
570
6%
819
10%
570
0%
704
-14%
599
5%
585
-17%
585
-2%
555
-5%
555
-5%
555
0%
555
0%
Import
Export
Coal Inventory
Days of Inventory
Rmb/t, VAT incl.
Spot thermal Coal at QHD(5500kcal/ kg)
yoy growth
Shenhua Contract Price at QHD (5500kcal/ kg)
yoy growth
Source: CEIC, SXCoal, Gao Hua Securities Research estimates.
Exhibit 32: Coking coal supply/demand model for China

mt
Coking coal Production
yoy growth
Coking coal net Import
(2)=(3)-(4)
(3)
(4)
2008
452
-1.1%
3
7
3
2009
449
-0.6%
34
34
1
2010
498
11.0%
46
47
1
2011
556
11.6%
44
45
1
2012
572
3.0%
53
54
1
2013E
595
4.0%
69
70
1
2014E
619
4.0%
69
70
1
2015E
634
2.5%
69
70
1
(5)=(1)+2)
455
483
6.1%
544
12.8%
599
10.1%
625
4.3%
664
6.3%
688
3.6%
703
2.2%
(6)
324
-1.6%
12.1
311
500
2.3%
255
85%
299
12
345
6.6%
0.5
344
568
13.5%
272
85%
318
26
388
12.3%
3.4
384
637
12.2%
294
87%
337
47
428
10.4%
3.3
424
685
7.5%
329
86%
382
43
443
3.6%
1.0
442
717
4.7%
341
86%
395
47
467
5.4%
3.0
464
760
6.0%
358
86%
415
49
485
3.9%
3.0
482
798
5.0%
372
86%
431
51
504
3.9%
3.0
501
838
5.0%
387
86%
448
53
453
-1.6%
483
6.6%
543
12.3%
599
10.4%
621
3.6%
654
5.4%
680
3.9%
706
3.9%
1,556
1,202
-23%
1,436
19%
1,522
6%
1,456
-4%
1,209
-17%
1,148
-5%
1,183
3%
(1)
Import
Export
Coking Coal Supply
yoy growth
Coke production
yoy growth
Coke export
Coke supply
Iron and steel
yoy growth
Coke consumption in steel
Coke consumption
Coke balance
Coking Coal Demand
yoy growth
HCC in Taiyuan, Shanxi (Rmb/ t, VAT incl.)
yoy growth
(7)
(8)=(6)-(7)
(9)
(10)
(11)
(12)=(10)/(11)
(13)=(8)-(12)
(14)=1.4* (6)
Source: Wind, SXCoal, Goldman Sachs Research estimates, Gao Hua Securities Research estimates.
We adjust our 2013-2015E coal price estimates. For 2013, we lower our thermal coal spot
price growth estimate from -10% to -17%, and coking coal price growth from -5% to -17%. For
thermal coal, the cut is mainly due to its slow and weaker-than-expected demand recovery. And
we lower the price estimates for coking coal as domestic supply remains loose -- the capacity of
consolidated coal mines in Shanxi will gradually come on line in 2013-14E -- and coking coal
imports grow fast thanks to abundant coking coal supply from Australia. Thus, we lower our
2013/14E coking coal price growth estimates to -17%/-5%; we maintain a price growth estimate of
3% beyond 2015E as coking coal supply will slow down sharply following capacity release by
consolidated coal mines in Shanxi.
13
2013 7 8
Exhibit 33: Chinas total coal production growth vs.

coking coal production growth
Exhibit 34: Chinas total coal imports growth vs. coking

coal imports growth
China coal production ytd yoy
China coal import yoy
China's large producers clean coal production ytd yoy
China coking coal import yoy
250.0%
20.00%
200.0%
15.00%
150.0%
10.00%
100.0%
5.00%
50.0%
0.00%
4/1/2013
0.0%
5/2013
3/2013
1/2013
11/2012
9/2012
7/2012
5/2012
3/2012
1/2012
11/2011
9/2011
7/2011
5/2011
3/2011
Source: SXCoal.
1/2011
-100.0%
11/2010
9/2010
7/2010
-15.00%
5/2010
-50.0%
3/2010
2/1/2013
12/1/2012
10/1/2012
8/1/2012
6/1/2012
4/1/2012
2/1/2012
12/1/2011
10/1/2011
8/1/2011
6/1/2011
-10.00%
4/1/2011
-5.00%
Source: CEIC.
We update our coal price estimates of listed coal companies based on our adjusted coal price
estimates for different coal types.
Exhibit 35: We adjust our 2013-15E domestic coal price estimates
2013
Thermal
Spot
Contract
Coking coal
Hard coking coal
Soft coking coal
Anthracite
Lump coal
PCI
2014
2015
Prev.
New
Prev.
New
Prev.
New
-10%
4%
-17%
-2%
0%
0%
-5%
-5%
-2%
-2%
0%
0%
-5%
-5%
-17%
-17%
3%
3%
-5%
-5%
3%
3%
3%
3%
-2%
-5%
-10%
-15%
3%
3%
-3%
-3%
3%
3%
3%
3%
Source: Gao Hua Securities Research estimates.
We update earnings estimates and target prices based on our coal price adjustments,
and lower our 2013/14/15 EPS estimates by 20.2%/34.0%/31.9% and our 12-month
target prices by 28.7% on average.
Exhibit 36: Adjustments to earnings estimates for coal companies under our coverage
Company
Lanhua
Lu'an
SDIC Xinji
Yitai (H)
Huolinhe
Yangquan
SCIE
Pingzhuang
Yitai (B)
Jizhong
Panjiang
Haohua
Pingdingshan
Xishan
Kailuan
Datong
Average
Ticker
600123.SS
601699.SS
601918.SS
3948.HK
002128.SZ
600348.SS
600546.SS
000780.SZ
900948.SS
000937.SZ
600395.SS
601101.SS
601666.SS
000983.SZ
600997.SS
601001.SS
Rating
Prev.
New
Buy*
Buy*
Buy
Buy
Buy
Buy
Buy
Neutral
Neutral Neutral
Neutral Neutral
Neutral Neutral
Neutral Neutral
Buy
Neutral
Buy
Neutral
Neutral Neutral
Neutral Neutral
Sell
Neutral
Neutral Neutral
Neutral
Sell
Sell
Sell
Prev.
1.61
1.10
0.59
3.71
0.95
0.82
1.11
0.31
3.71
0.90
0.69
0.67
0.31
0.48
0.30
-0.01
2013E EPS
New
1.40
0.84
0.48
2.85
0.89
0.72
0.90
0.23
2.85
0.73
0.52
0.60
0.22
0.32
0.23
-0.26
% chg
-12.7%
-23.9%
-17.7%
-23.2%
-6.4%
-12.2%
-19.5%
-27.5%
-23.2%
-19.2%
-24.3%
-9.6%
-29.0%
-33.5%
-21.5%
n/m
-20.2%
Prev.
1.99
1.28
0.66
4.16
0.94
0.82
1.64
0.29
4.16
0.98
0.96
0.66
0.31
0.50
0.37
0.02
2014E EPS
New
1.66
0.85
0.51
3.00
0.77
0.63
1.15
0.15
3.00
0.64
0.62
0.45
0.13
0.22
0.20
-0.39
% chg
-16.9%
-34.0%
-22.2%
-27.7%
-17.6%
-23.6%
-29.7%
-47.5%
-27.7%
-34.0%
-35.9%
-31.2%
-57.9%
-56.7%
-46.7%
n/m
-34.0%
Prev.
2.33
1.48
0.67
4.58
0.83
0.79
1.70
0.27
4.58
1.01
1.30
0.66
0.21
0.54
0.45
-0.02
2015E EPS
New
1.96
1.02
0.58
3.29
0.75
0.67
1.26
0.11
3.29
0.70
0.79
0.45
0.10
0.25
0.26
-0.35
% chg
-16.0%
-31.2%
-13.7%
-28.2%
-9.5%
-15.1%
-25.9%
-60.2%
-28.2%
-31.3%
-39.3%
-30.7%
-53.8%
-54.2%
-40.9%
n/m
-31.9%
Prev.
26.23
23.42
10.22
50.59
11.83
14.36
18.60
8.00
6.49
16.71
15.13
8.56
4.99
9.99
9.31
4.83
12M TP
New
18.26
14.94
8.56
39.64
9.29
9.39
12.25
5.54
5.08
8.73
8.84
7.45
4.83
7.32
4.44
3.51
% chg
-30.4%
-36.2%
-16.2%
-21.6%
-21.5%
-34.6%
-34.2%
-30.7%
-21.6%
-47.7%
-41.6%
-13.0%
-3.2%
-26.7%
-52.3%
-27.2%
-28.7%
2-Jul
11.64
11.45
7.55
36.40
8.55
8.79
11.54
5.26
4.83
8.63
9.03
7.82
5.14
7.89
5.70
5.65
Price
pot. up/dow n
56.9%
30.5%
13.3%
8.9%
8.7%
6.8%
6.1%
5.3%
5.2%
1.2%
-2.1%
-4.8%
-6.0%
-7.2%
-22.1%
-37.8%
Note: Yitai Bs TP in US$, Yitai Hs in HK$, all others in Rmb. All EPS figures in Rmb.
14
2013 7 8
Exhibit 37: Our estimates vs. consensus

Rmb/ share
2013 GH estimated EPS
2013 Wind consensus EPS
Difference
Difference
Rmb/ share
Difference
Difference
Jizhong
Lanhua
Pingzhuang
Lu'an
Panjiang
Xishan
Yangquan
0.73
0.86
-15%
0.64
0.94
-32%
1.40
1.63
-14%
1.66
1.90
-13%
0.23
0.38
-40%
0.15
0.43
-65%
0.84
1.17
-29%
0.85
1.35
-37%
0.52
0.64
-19%
0.62
0.80
-23%
0.32
0.54
-41%
0.22
0.66
-67%
0.72
0.89
-19%
0.63
1.00
-38%
Kailuan
Haohua
Pingdingshan
SCIE
Huolinhe
Yitai
SDIC Xinji
0.23
0.31
-25%
0.20
0.38
-48%
0.60
0.64
-6%
0.45
0.65
-30%
0.22
0.37
-40%
0.13
0.38
-66%
0.90
1.20
-25%
1.15
1.62
-29%
0.89
1.04
-15%
0.77
1.09
-29%
2.85
3.94
-28%
3.00
4.50
-33%
0.48
0.51
-4%
0.51
0.61
-15%
2013E
50.6
47.3
375
93
209
110
2013E
42.0
46.0
144
97
100
28
2013E
10.2
10.2
254
193
189
23
2013E
21.1
18.3
454
331
333
49
2013E
37.2
27.7
439
231
382
11
2014E
57.0
53.5
364
93
210
101
2014E
44.0
48.0
138
97
100
23
2014E
10.7
10.7
244
193
189
14
2014E
24.1
20.9
435
325
325
45
2014E
40.7
31.2
408
230
366
3
2015E
62.8
59.2
364
93
212
99
2015E
46.0
50.0
138
99
102
22
2015E
10.7
10.7
244
196
193
10
2015E
28.0
24.3
435
331
333
44
2015E
44.7
35.2
403
229
355
8
Source: Wind, Gao Hua Securities Research estimates.
Exhibit 38: Operating data comparison of thermal coal firms under our coverage
Yitai Coal
Production volume (mt)
Sales volume (mt)
ASP (Rmb/t)
Unit production cost (Rmb/t)
Unit cash cost (Rmb/t)
NP/t (Rmb/t)
Huolinhe Opencut Coal
Sales volume (mt)
ASP (Rmb/t)
NP/t (Rmb/t)
Pingzhuang Energy
Sales volume (mt)
ASP (Rmb/t)
NP/t (Rmb/t)
SDIC Xinji
Sales volume (mt)
ASP (Rmb/t)
NP/t (Rmb/t)
Datong Coal
Sales volume (mt)
ASP (Rmb/t)
NP/t (Rmb/t)
2006
2006
2007
13.7
13.6
281
56
124
122
2007
25.3
27.3
94
59
65
19
2007
7.3
7.3
180
85
107
27
2007
2006
13.3
11.7
334
129
254
45
2007
17.5
15.3
333
130
234
59
2006
18.6
20.6
2006
5.6
5.6
2008
18.2
17.9
429
61
196
171
2008
34.8
36.8
103
69
74
19
2008
9.2
9.2
237
136
130
56
2008
11.8
10.9
458
262
277
99
2008
20.3
17.3
481
198
311
111
2009
26.0
24.7
362
66
176
132
2009
40.3
42.3
108
70
70
26
2009
10.0
10.0
219
137
136
47
2009
12.5
11.0
426
281
267
76
2009
25.8
21.8
433
177
286
92
2010
38.4
36.1
376
81
185
148
2010
40.0
42.5
131
75
77
38
2010
9.8
9.6
278
165
168
67
2010
15.1
13.3
498
321
320
93
2010
29.3
22.5
457
189
307
93
2011
53.8
53.8
400
99
196
154
2011
41.0
44.0
147
88
88
40
2011
10.6
10.7
302
164
171
83
2011
15.3
13.8
534
347
349
96
2011
30.9
23.8
513
212
359
80
2012
53.1
49.8
418
95
211
147
2012
41.0
45.0
151
92
94
38
2012
9.9
9.9
291
193
192
42
2012
19.0
16.4
510
338
344
81
2012
37.1
27.1
480
225
389
35
Source: Company data, Gao Hua Securities Research estimates.
15
2013 7 8
Exhibit 39: Operating data comparison of coking coal firms under our coverage
Jizhong Energy Resources
Sales volume (mt)
ASP (Rmb/t)
NP/t (Rmb/t)
Lu'an Environment Energy
Sales volume (mt)
ASP (Rmb/t)
NP/t (Rmb/t)
SCIE
Sales volume (mt)
ASP (Rmb/t)
NP/t (Rmb/t)
Panjiang Refined Coal
Sales volume (mt)
ASP (Rmb/t)
NP/t (Rmb/t)
Kailuan Energy Chemical
Sales volume (mt)
ASP (Rmb/t)
NP/t (Rmb/t)
Xishan Coal and Energy Power
Sales volume (mt)
ASP (Rmb/t)
NP/t (Rmb/t)
Pingdingshan Tianan Coal
Sales volume (mt)
ASP (Rmb/t)
NP/t (Rmb/t)
2006
8.6
2007
11.4
2008
23.2
2006
19.7
18.6
383
235
263
47
2006
2007
20.4
19.5
422
232
260
76
2007
2.7
2.8
350
2008
25.8
23.2
567
253
388
97
2008
3.3
3.6
494
2007
1.7
4.5
526
296
205
120
2007
7.5
4.9
471
172
315
95
2007
16.1
16.3
407
186
250
80
2007
26.7
26.7
370
273
274
41
165
199
2008
2.4
4.8
837
293
280
386
2008
7.5
4.0
862
243
598
149
2008
16.2
16.2
740
272
362
228
2008
28.7
33.8
540
361
388
81
2006
2006
7.5
4.7
459
145
294
97
2006
15.2
14.7
400
178
236
82
2006
22.8
22.4
331
234
258
38
2009
25.9
27.1
611
217
433
85
2009
30.0
26.7
541
288
379
82
2009
4.6
4.4
502
152
139
217
2009
9.3
7.1
631
283
424
140
2009
7.7
4.5
839
301
582
133
2009
18.6
17.8
609
256
339
153
2009
37.4
35.6
422
324
339
40
2010
31.0
34.4
719
310
534
95
2010
33.2
29.6
614
291
407
113
2010
6.1
5.9
707
277
328
228
2010
11.4
7.5
717
262
452
179
2010
8.3
6.2
829
394
609
106
2010
25.8
21.8
689
247
401
149
2010
39.8
37.3
488
363
377
49
2011
34.2
39.7
777
387
585
101
2011
34.2
30.5
689
319
454
109
2011
7.4
7.4
696
297
297
226
2011
12.3
9.9
769
344
515
174
2011
8.4
6.4
883
457
676
88
2011
29.4
21.3
809
247
445
152
2011
38.6
37.2
550
411
423
48
2012
36.4
38.0
668
369
516
69
2012
33.3
28.7
666
322
456
71
2012
11.4
11.4
647
261
374
131
2012
13.6
10.1
778
345
552
151
2012
8.9
6.5
738
378
586
50
2012
27.9
25.4
705
309
467
85
2012
38.4
35.7
532
414
439
33
2013E
35.9
37.5
587
355
456
53
2013E
35.9
31.0
604
316
436
54
2013E
15.1
14.9
539
303
308
113
2013E
12.5
9.5
708
352
533
96
2013E
8.9
6.6
649
374
545
26
2013E
30.1
28.2
583
310
412
48
2013E
38.7
36.0
494
407
422
16
2014E
36.5
38.1
564
347
440
46
2014E
42.0
36.2
580
309
426
50
2014E
20.2
20.0
502
299
311
96
2014E
17.9
13.2
684
345
541
82
2014E
9.9
7.2
634
372
541
20
2014E
33.6
31.3
544
310
406
32
2014E
42.5
39.5
475
398
416
9
2015E
36.5
38.1
576
354
445
50
2015E
48.9
42.2
588
316
437
52
2015E
21.1
20.9
507
302
314
98
2015E
22.4
16.7
696
359
558
84
2015E
10.9
7.9
654
378
553
26
2015E
34.1
31.5
554
313
411
35
2015E
46.0
42.8
480
406
429
7
16
2013 7 8
Exhibit 40: Operating data comparison of anthracite coal firms under our coverage
Shanxi Lanhua Sci Tech
Sales volume (mt)
ASP (Rmb/t)
NP/t (Rmb/t)
Haohua Energy
Sales volume (mt)
ASP (Rmb/t)
NP/t (Rmb/t)
Yangquan Coal
Sales volume (mt)
ASP (Rmb/t)
NP/t (Rmb/t)
2006
2007
2006
2007
5.0
5.9
426
213
329
59
2007
12.9
29.7
322
218
189
66
2006
14.7
25.5
327
162
219
61
2008
5.5
5.4
614
237
295
195
2008
4.6
5.6
733
359
544
133
2008
17.7
36.3
439
274
316
55
2009
5.6
5.8
619
251
286
195
2009
5.1
5.4
561
307
429
89
2009
21.0
39.5
440
259
271
92
2010
6.0
5.7
635
197
265
205
2010
7.1
7.1
566
312
381
126
2010
26.2
45.4
489
296
303
95
2011
6.0
5.3
832
198
375
270
2011
8.8
10.9
630
439
450
121
2011
27.6
51.1
548
352
350
100
2012
5.8
6.3
741
279
332
233
2012
10.3
13.6
504
411
394
70
2012
30.4
56.5
513
396
328
80
2013E
6.7
6.4
665
245
292
194
2013E
11.5
14.7
442
402
353
53
2013E
30.5
59.1
475
392
324
59
2014E
10.3
10.0
618
248
315
164
2014E
12.0
15.2
412
402
341
38
2014E
31.5
62.0
461
392
320
50
2015E
13.4
12.9
629
253
333
165
2015E
12.5
15.7
410
410
341
37
2015E
32.2
64.8
467
400
319
52
Exhibit 41: Comparison of A-share coal firms historical P/E

Forw ard P/ E
Historical M ax
Historical M in
Historical average
Historical median
Historical Stdev
Current (2013.6.28)
Forw ard P/ E
Historical M ax
Historical M in
Historical average
Historical median
Historical Stdev
Current (2013.6.28)
Lanhua
36.8
5.0
15.0
14.1
5.1
8.3
Haohua
34.9
14.6
23.4
22.2
4.7
15.0
SDIC Xinji
38.6
9.9
20.0
19.0
4.6
15.2
Huolinhe
67.0
6.7
21.4
17.9
12.0
10.5
Lu'an
30.0
5.1
17.0
17.8
6.0
14.2
Kailuan
48.4
6.2
26.2
30.2
11.6
26.2
Jizhong
27.6
7.0
15.5
15.0
4.4
11.4
Pingdingshan
44.0
6.5
21.4
21.1
7.9
29.4
Panjiang
49.6
15.2
30.2
29.9
6.5
16.1
Xishan
47.9
6.5
24.8
27.0
10.3
30.4
Pingzhuang
45.6
8.3
24.7
23.8
9.0
28.2
SCIE
55.2
11.3
28.1
29.0
6.9
11.6
Yangquan
40.3
4.8
16.6
17.5
6.7
13.4
M edian
44.0
6.7
21.4
21.1
6.7
15.0
Source: Bloomberg, Gao Hua Securities Research estimates.
1: Comparison of A-share coal firms historical P/B

Forw ard P/ B
Historical Max
Historical Min
Historical average
Historical median
Historical Stdev
Current (2013.6.28)
Forw ard P/ B
Historical Max
Historical Min
Historical average
Historical median
Historical Stdev
Current (2013.6.28)
Lanhua
8.1
1.3
3.3
2.8
1.3
1.3
Haohua
7.7
1.2
3.5
3.6
1.2
1.3
Jizhong
Pingzhuang
7.0
7.6
1.2
1.1
3.0
3.3
2.9
3.0
1.1
1.3
1.2
1.1
Pingdingshan
SCIE
8.0
13.1
1.1
1.3
3.3
3.2
3.0
2.9
1.4
1.5
1.1
1.3
Lu'an
8.3
1.2
3.7
3.7
1.4
1.5
Huolinhe
17.5
1.7
6.1
6.0
3.3
1.7
Panjiang
10.4
1.9
5.8
6.0
1.8
1.9
SDIC Xinji
6.2
1.4
3.1
2.9
1.0
1.4
Xishan
11.1
1.2
4.4
4.2
2.2
1.6
Shenhua
12.6
1.1
3.0
2.3
2.0
1.2
Datong
6.2
1.1
2.8
2.7
1.1
1.1
ChinaCoal
5.5
0.7
1.9
1.6
0.9
0.7
Yangquan
8.5
1.2
3.5
3.5
1.6
1.5
Yanzhou
5.2
1.0
2.6
2.4
0.8
1.0
Kailuan
8.2
1.0
3.2
2.9
1.6
1.0
M edian
8.2
1.2
3.2
2.9
1.5
1.3
Source: Bloomberg, Gao Hua Securities Research estimates.
17
2013 7 8
Adopting EV/EBITDA framework; Buy Lanhua/Luan/SDIC;

Pingdingshan/Jizhong/Yitai to Neutral; Kailuan to Sell
We have been using the Directors Cut valuation framework to calculate target prices for the coal
names under our coverage since 2011. However, as the commodity is experiencing a down cycle
and industry returns have dropped to a very low level, we believe the Directors Cut framework
may no longer be the optimal valuation methodology. We conducted regression analysis for
different periods since 1998, and found that EV/EBITDA has consistently outperformed other
methodologies.
2: Historical analysis of domestic coal companies using different valuation
methodologies: alpha generated
1998 - 2012
long stocks
short stocks
long+short
Director's Cut
17%
19%
38%
PB vs ROE
24%
23%
50%
PE
30%
18%
53%
EV/EBITDA
32%
15%
49%
2009 - 2012
long stocks
short stocks
long+short
Director's Cut
17%
18%
38%
PB vs ROE
17%
8%
25%
PE
20%
17%
39%
EV/EBITDA
30%
15%
47%
2010 - 2012
long stocks
short stocks
long+short
Director's Cut
7%
10%
18%
PB vs ROE
15%
13%
29%
PE
15%
13%
30%
EV/EBITDA
26%
14%
43%
1998 - 2013 ytd

long stocks
short stocks
long+short
Director's Cut
15%
18%
35%
PB vs ROE
22%
21%
46%
PE
28%
17%
49%
EV/EBITDA
30%
14%
46%
2009 - 2013 ytd

long stocks
short stocks
long+short
Director's Cut
14%
16%
32%
PB vs ROE
14%
7%
21%
PE
17%
14%
33%
EV/EBITDA
25%
13%
40%
2010 - 2013 ytd

long stocks
short stocks
long+short
Director's Cut
5%
9%
15%
PB vs ROE
12%
10%
23%
PE
12%
11%
24%
EV/EBITDA
21%
11%
35%
We use the EV/EBITDA valuation methodology as follows: we set a premium or discount for
different companies based on the industrys current EV/EBITDA level; while the target
premium/discounted is derived from each companys average premium/discount relative to the
industry in 2005-2013, with the companys overall return on asset (EBITDA/assets) in the next
few years serving as a reference for further adjustments.
18
EBITDA/Asset
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2005-2012 avg
Quartile
2013-2015 avg
Quartile
Lanhua
20.1%
24.7%
28.1%
19.7%
19.0%
20.1%
15.8%
16.0%
18.7%
12.4%
11.7%
13.1%
14.8%
18.7%
3
13.2%
2
Lu'an
39.0%
24.0%
21.0%
27.3%
20.5%
22.0%
21.5%
16.3%
14.5%
14.4%
13.8%
23.9%
2
14.2%
1
Jizhong SDIC Xinji

14.9%
20.3%
8.1%
25.9%
9.7%
19.1%
10.8%
21.1%
10.3%
28.2%
15.5%
17.2%
11.6%
20.0%
13.9%
16.1%
13.3%
13.8%
13.2%
11.5%
11.1%
10.5%
10.8%
10.3%
10.5%
20.2%
12.3%
3
4
10.8%
10.8%
3
3
Yitai
PanjiangPingzhuangYangquan Xishan
12.0%
8.6%
4.8%
13.1%
11.4%
22.3%
10.1%
4.6%
18.6%
14.1%
32.1%
13.9%
-13.4%
21.0%
20.4%
23.0%
12.5%
-3.7%
21.6%
20.3%
14.0%
13.7%
11.6%
19.2%
18.5%
24.8%
30.5%
28.0%
23.8%
30.9%
21.6%
20.5%
18.4%
20.5%
18.1%
27.8%
24.2%
20.0%
22.8%
19.8%
26.0%
20.8%
25.5%
20.0%
19.7%
24.6%
17.2%
17.2%
16.7%
13.8%
18.4%
13.2%
11.4%
13.5%
11.7%
17.3%
12.9%
9.8%
12.7%
10.5%
16.9%
13.4%
8.9%
12.9%
10.5%
24.2%
19.2%
12.9%
20.7%
20.2%
2
3
4
2
2
17.5%
13.1%
10.1%
13.0%
10.9%
1
2
3
2
3
SCIE
Kailuan Haohua Huolinhe Datong Pingdingshan
6.5%
20.1%
25.0%
8.0%
16.3%
16.4%
32.1%
4.9%
15.2%
28.1%
15.3%
34.5%
3.2%
14.8%
35.1%
21.1%
13.8%
19.8%
2.9%
16.3%
30.5%
21.1%
18.8%
21.6%
12.9%
14.4%
37.9%
25.8%
24.2%
36.0%
11.7%
13.8%
20.8%
19.6%
21.7%
18.8%
11.6%
12.9%
14.9%
27.8%
20.3%
22.8%
10.6%
11.3%
18.7%
28.4%
20.7%
25.0%
8.9%
9.3%
12.8%
26.2%
11.8%
16.2%
9.7%
7.2%
10.8%
18.4%
7.5%
12.9%
10.1%
7.2%
9.0%
15.4%
6.2%
11.3%
9.9%
7.8%
8.8%
14.0%
7.6%
10.3%
8.3%
13.5%
24.4%
24.8%
18.3%
24.3%
4
4
1
1
3
1
9.9%
7.4%
9.5%
15.9%
7.1%
11.5%
4
4
4
1
4
2
2013 7 8
3: Ranking of companies under our coverage by EBITDA/assets
4: Calculation of our EV/EBITDA-based target prices

Current sector EV/EBITDA
Historical premium / discount
Current premium / discount
Estimated premium / discount
Target EV/EBITDA
2013-15 EBITDA
Estimated EV
2013/2014 Net debt
2013/2014 Minority interest
Estimated MV
Shares
TP
Current share price
Upsiden / downside potential
Lanhua
6.55
-8.7%
-28.3%
-10%
5.90
3,376
19,904
(1,821)
868
20,858
1,142
18.26
11.64
56.9%
Lu'an SDIC Xinji Yitai H

6.55
6.55
6.55
-25.8%
16.8%
-34.1%
-25.4%
16.4%
-20.3%
-15%
20%
-10%
5.57
7.86
5.90
6,360
3,048
10,618
35,410
23,956
62,595
807
8,092
1,519
229
29
3,015
34,375
15,835
58,061
2,301
1,850
1,627
14.94
8.56 HKD 39.64
11.45
7.55
36.40
30.5%
13.3%
8.9%
Huolinhe Yangquan
6.55
6.55
56.4%
-23.9%
11.3%
-20.1%
20%
-20%
7.86
5.24
1,723
4,417
13,545
23,148
1,161
(954)
58
1,515
12,326
22,587
1,327
2,405
9.29
9.39
8.55
8.79
8.7%
6.8%
SCIE Pingzhuang Jizhong Panjiang

6.55
6.55
6.55
6.55
-17.3%
17.5%
-23.9%
14.0%
-9.5%
-13.0%
-11.0%
36.2%
-10%
0%
-20%
20%
5.90
6.55
5.24
7.86
4,837
585
4,753
2,098
28,517
3,834
24,905
16,489
12,430
(1,786)
1,344
1,165
3,945
3,360
698
12,142
5,620
20,201
14,625
991
1,014
2,313
1,655
12.25
5.54
8.73
8.84
11.54
5.26
8.63
9.03
6.1%
5.3%
1.2%
-2.1%
Haohua ingdingsha Xishan

6.55
6.55
6.55
23.7%
-22.2%
8.5%
26.5%
-20.5%
2.1%
20%
-20%
0%
7.86
5.24
6.55
1,244
2,436
5,028
9,775
12,767
32,935
(788)
741
6,939
1,626
616
2,933
8,938
11,410
23,063
1,200
2,361
3,151
7.45
4.83
7.32
7.82
5.14
7.89
-4.8%
-6.0%
-7.2%
Kailuan
6.55
13.7%
11.2%
0%
6.55
1,576
10,325
3,016
1,829
5,481
1,235
4.44
5.70
-22.1%
Datong
6.55
-9.2%
44.9%
-5%
6.22
1,588
9,884
(1,891)
5,893
5,881
1,674
3.51
5.65
-37.8%
19
Yitai B
6.55
-25.5%
-0.4%
0%
6.55
8,494
55,640
1,519
3,015
51,106
1,627
$5.08
4.83
5.2%
2013 7 8
Changes to our investment views

Based on our new valuation methodology and the updated earnings estimates, we downgrade
Yitai B/H and Jizhong to Neutral from Buy and Kailuan to Sell from Neutral, and upgrade
Pingdingshan to Neutral from Sell.
Kailuan: Downgrade to Sell from Neutral (22.1% downside potential)
We apply a 0% valuation premium and downgrade the rating to Sell from Neutral. The companys
coal output is stable, but the coke segment is on the verge of breakeven. The stock suspended
trading from January 22, 2013 and announced a plan to acquire coal assets from the parent
company via private placement; however, the firm announced on April 27 that it has decided not
to proceed with this asset restructuring in light of the highly volatile profitability of the target asset.
Based on our latest coal price estimates, we lower our 2013E/14E/15E EPS by
21.5%/46.7%/40.9% to Rmb0.23/0.20/0.26. Our new EV/EBITDA-based 12-month target price is
Rmb4.44 vs. our previous Directors Cut-based 12-month target price of Rmb9.31. Upside risks:
Restarting acquisition of coal assets from the parent.
Yitai B/H: downgrade to Neutral from Buy (5.2%/8.9% upside potential)
We apply 0% valuation premium and downgrade our rating to Neutral, mainly because:
1) the shares have significantly outperformed the market since we added the company to our Buy
list on October 30, 2012: -10.32%/-14.29% for Yitai B/H vs. -31.95% for the coal industry index; 2.
lower prices at Qinhuangdao have apparently weighed on the companys sales volume and ASP.
Yitais fundamentals remain healthy: 1) good management has kept costs at the low end within
the industry; 2) CTL projects are likely to become new growth drivers (current profit/t at about
Rmb1,200). We update our model based the latest coal price estimates, and lower
2013E/14E/15E EPS by 23.2%/27.7%/28.2% to Rmb2.85/3.00/3.29. Our new EV/EBITDA-based
12-month target prices for Yitai B/H are US$5.08/HK$39.64, vs. previous US$6.49/HK$50.59
under the Directors Cut framework. Upside risks: better-than-expected thermal coal prices;
downside risks: further declines in thermal coal prices.
Jizhong: Downgrade to Neutral from Buy (1.2% upside potential)
We apply a 20% valuation discount and downgrade our rating to Neutral. According to Jizhong
Groups prior commitment to avoid horizontal competition, the listed firm is expected to
acquire assets from the parent company; however, as falling coal prices have undermined
the parent companys profitability, we believe the likelihood to acquire assets from the
parent is small in the near term. Based on our latest coal price estimates, we lower our
12-month target price is Rmb8.73, implying 1.2% upside potential (our previous Directors Cutbased 12-month target price was Rmb16.71). Upside risks: faster-than-expected progress on
asset injections; downside risks: further declines in coking coal prices.
Pingdingshan: Upgrade to Neutral from Sell (6.0% downside potential)
We apply a 20% valuation discount and upgrade our rating to Neutral. Pingdingshan has a high
proportion of retired employees and aging mines, and the group company does not have highquality assets available to inject into the listed company. However, the companys persistently
weakening stock price has already partly reflected the markets pessimistic expectations. Based
on our latest coal price estimates, we lower our 2013E/14E/15E EPS by 29.0%/57.9%/53.8% to
Rmb0.22/0.13/0.10. Our EV/EBITDA-based 12-month target price is Rmb4.83 vs. our previous
Directors Cut-based 12-month target price of Rmb4.99. We upgrade the rating to Neutral from
Sell. Upside risks: 2013 steelmaking demand pushing coking coal prices significantly higher.
Downside risks: weaker-than-expected costs controls.
20
2013 7 8
Our Buy-rated stocks

Lanhua Sci-Tech: Reiterate CL-Buy (56.9% upside potential)
We apply a 10% discount and reiterate CL-Buy. Our key investment views are as follows: 1)
Production is set to increase rapidly over the next several years. We estimate 4.8mt of
consolidated capacity and 2.4mt of capacity at the Yuxi mine will gradually come on line from
2013-2015, doubling Lanhuas production and significantly improving growth relative to the past
five years. 2) Relative to thermal coal and coking coal, the downstream fertilizer demand for
anthracite is stable. Based on our latest coal price estimates, we lower our 2013E/14E/15E EPS
by 12.7%/16.9%/16.0% to Rmb1.40/1.66/1.96. Our new EV/EBITDA-based 12-month target price
is Rmb18.26, implying 56.9% upside potential (our previous Directors Cut-based 12-month target
price was Rmb26.23). Downside risks: falling urea prices lead to further deterioration of the firms
fertilizer business and put pressure on the firms lump coal prices.
Luan: Maintain Buy (30.5% upside potential)
We apply 15% valuation discount and reiterate our Buy rating. We believe 2013 will likely see
capacity release from consolidated mines, and assets held by the parent group, such as the Sima
mine (a 3mt mine which posted actual production of 4.01mt in 2011 with profits of Rmb1.53bn),
are likely to be injected into the listed firm. We update our model based on our latest coal price
estimates, and lower our 2013E/2014E/2015E EPS by 23.9%/34.0%/31.2% to Rmb0.84/0.85/1.02.
Our new EV/EBITDA-based 12-month target price is Rmb14.94, implying 30.5% upside potential
(our previous Directors Cut-based 12-month target price was Rmb23.42). Downside risks:
slower-than-expected growth in steel production causes PCI coal prices to fall.
SDIC Xinji: Maintain Buy (13.3% upside potential)
We apply a 20% valuation premium and maintain our Buy rating. We expect coal production to
maintain rapid growth in 2013-2015. Based on our most recent coal price estimates, we lower our
2013E/2014E/2015E EPS by 17.7%/22.2%/13.7% to Rmb0.48/0.51/0.58. SDIC Xinji announced
on May 15, 2013 that its largest shareholder, SDIC, is planning a major issue involving Xinji, and
that trading of the companys shares will be suspended from the second day. We believe this
suspension may be related to competition issues with the parent firm. We need to await further
announcements from SDIC Xinji as to whether it will acquire more coal assets. Note that there is
precedence for deals not to go ahead in this sector. Kailuan, three months after its shares were
suspended, announced it would not complete an acquisition due to the deteriorating profitability of
its parent companys assets. In light of our latest earnings estimates, our new EV/EBITDA-based
12-month target price is Rmb8.56, implying 13.3% upside potential (our previous Directors Cutbased 12-month target price was Rmb10.22). Downside risks: Shenhua coal competing in the
Anhui market could weigh on local coal prices; weaker-than-expected asset injection plans.
Other Sell-rated stocks

Datong: Maintain Sell (37.8% downside potential)
We apply a 5% valuation discount and maintain our Sell rating. As the company only produces
thermal coal and its profit per ton is at a low level among peers (the company reported losses in
2H2012 and 1Q2013), we believe large declines in coal prices will have a bigger impact on
Datong; and we estimate continued losses in 2Q2013. We update our model based on our latest
coal price estimates, and substantially lower our 2013E/14E/15E EPS to Rmb-0.26/-0.39/-0.35.
Our new EV/EBITDA-based 12-month target price is Rmb3.51, implying 37.8% downside
potential (our previous Directors Cut-based 12-month target price was Rmb4.83). Upside risks:
faster-than-expected progress on asset injections.
21
2013 7 8
Other Neutral-rated stocks

SCIE: Maintain Neutral
We apply a 10% valuation discount and maintain our Neutral rating. With the under-construction
mine purchased from the group company in 2011 about to come on line, production is likely to
maintain rapid growth. However, the company is facing a heavy financial burden, with end -1Q
cash of Rmb3.37bn vs. short-term borrowings of Rmb11.56bn and long-term borrowings of
Rmb3.11bn, leading to a liability-to-asset ratio as high as 76.5%. We update our model based on
our latest coal price estimates, and lower our 2013E/14E/15E EPS by 19.5%/29.7%/25.9% to
Rmb0.90/1.15/1.26. Our new EV/EBITDA-based 12-month target price is Rmb12.25 vs. our
previous Directors Cut-based 12-month target price of Rmb18.60. Upside risks: faster-thanexpected construction progress of consolidating mines. Downside risks: profitability of the coal
trading business deteriorates further.
Panjiang: Maintain Neutral
We apply a 20% valuation premium and maintain our Neutral rating. Panjiang has maintained
rapid organic growth, and is likely to benefit from coal industry consolidation in Guizhou. However,
following the Jinjia and Xiangshui mine accidents, we estimate slower asset injections, and we
see Panjiang Groups position weakening in Guizhous coal industry consolidation. Because of
accidents at the Jinjia and Machang mines, Panjiang had to stop production on January 22 and
March 15, inevitably having an impact of the companys 2013 output. We update our model based
on our latest coal price estimates, and we lower our 2013E/14E/15E EPS by 24.3%/35.9%/39.3%
to Rmb0.52/0.62/0.79. Our EV/EBITDA-based 12-month target price is Rmb8.84 vs. our previous
Directors Cut-based 12-month target price of Rmb15.13. Upside risks: steel demand drives
coking coal prices significantly higher. Downside risks: complex geology impacts coal production.
Yangquan: Maintain Neutral
We apply a 20% valuation discount and maintain our Neutral rating. We will watch for progress in
acquisition of assets from the parent company. We lower our 2013E/14E/15E EPS by
12.2%/23.6%/15.1% to Rmb0.72/0.63/0.67. Our new EV/EBITDA-based 12-month target price is
Rmb9.39 vs. our previous Directors Cut-based 12-month target price of Rmb14.36. Maintain
Neutral. Upside risks: faster-than-expected asset injections. Downside risks: weak downstream
demand causes anthracite prices to fall.
Pingzhuang: Maintain Neutral
We apply a 0% valuation discount and maintain our Neutral rating. The firm is still waiting for the
group company to inject the Yuanbaoshan and Baiyinhua mines. Based on our latest coal price
assumptions, we lower our 2013E/14E/15E EPS by 27.5%/47.5%/60.2% to Rmb0.23/0.15/0.11.
After we lower our earnings estimates, our new EV/EBITDA-based 12-month target price is
Rmb5.54 vs. our previous Directors Cut-based 12-month target price of Rmb8.00. Upside risks:
faster-than-expected progress on acquisition of Yuanbaoshan and Baiyinhua mines. Downside
risks: slackened demand in nearby regions could result in lower-than-expected ASP.
Xishan: Maintain Neutral
We apply a 0% valuation premium and maintain our Neutral rating. The company has high-quality
coking coal resources, and will benefit from the protective mining policies on rare coal varieties
implemented by the government at the end of 2012. However, cost control has been weak over
the past two years, and earnings remain below expectations (including losses of Rmb107mn in
4Q12). Based on our latest coal price estimates, we lower our 2013E/14E/15E EPS by
33.5%/56.7%/54.2% to Rmb0.32/0.22/0.25. Therefore, our new EV/EBITDA-based 12-month
target price is Rmb7.32 vs. our previous Directors Cut-based 12-month target price of Rmb9.99.
Upside risks: better-than-expected cost controls. Downside risks: lower-than-expected production
from the Xiegou mine.
Haohua: Maintain Neutral
22
2013 7 8
We apply a 20% valuation premium and maintain our Neutral rating. We update our model based
on our latest coal price estimates, and lower our 2013E/14E/15E EPS by 9.6%/31.2%/30.7% to
Rmb0.60/0.45/0.45. Our new EV/EBITDA-based 12-month target price is Rmb7.45 vs. our
previous Directors Cut-based 12-month target price of Rmb8.56. Upside risks: better-thanexpected production and profitability at the Gaojialiang mine. Downside risks: a slowdown in
demand from the steel industry impacts the firms anthracite business.
Huolinhe: Maintain Neutral
We apply a 20% valuation premium and maintain our Neutral rating. We lower our
12-month target price is Rmb9.29 vs. our previous Directors Cut-based 12-month target price of
Rmb11.83. Upside risks: faster-than-expected progress on asset injections. Downside risks:
significantly lower ASP.
23
2013 7 8
Kailuan (600997.SS): Down to Sell on downward price pressure

Source of opportunity
Investment Profile
We believe Kailuan is relatively susceptible to falling coking coal and coke

prices, and its organic growth is suffering from the failed asset restructuring it
announced early this year. To reflect our lower coal price estimates, we cut
our 2013E/14E/15E EPS by 21.5%/46.7%/40.9% to Rmb0.23/0.20/0.26. Our
new EV/EBITDA-based 12-month target price of Rmb4.44 implies 22.1%
downside potential (our previous Directors Cut-based 12-month target price
was Rmb9.31). We therefore downgrade Kailuan to Sell from Neutral.
Low
High
Growth
Growth
Returns *
Returns *
Catalyst
Under pressure from downside in coal and coke prices. Since the
beginning of the year, fat clean coal prices have fallen 20.0% to Rmb983/t
from Rmb1,228/t in Tangshan, where Kailuan is located, and coke prices
have declined 16.9% to Rmb1,280/t from Rmb1,540/t. Given the loose
domestic supply (the capacity of consolidated coal mines in Shanxi will
gradually come on line in 2013-14E) and growing imports, we believe coking
coal prices will not improve significantly in the near term.
Failed asset restructuring. Trading of the shares was suspended on

January 22, 2013 when Kailuan announced plans to acquire coal assets from
its parent (Kailuan Group) via a private placement. However, on April 27
Kailuan announced it was cancelling the acquisition due to the highly volatile
performance of the target asset. It also said it was shelving its asset
restructuring plans for six months. Kailuan Group reported a net profit of
Rmb1.06bn in 2012 but a net loss of Rmb34mn in 1Q2013. We expect
downward pressure on coal prices to continue and Kailuan is very unlikely to
take up asset restructuring again in 2013-2014.
Valuation
Kailuan is trading at a 2013E EV/EBITDA of 7.7X, above the industry average
of 6.7X.
Multiple
Multiple
Volatility
Volatility
Percentile
40th
60th
80th
100th
Asia Pacific Metals & Mining Peer Group Average

* Returns = Return on Capital
For a complete description of the investment

profile measures please refer to the
disclosure section of this document.
Key data
Current
Price (Rmb)
12 month price target (Rmb)
Market cap (Rmb mn / US$ mn)
Foreign ownership (%)
EPS (Rmb)
EPS growth (%)
EPS (diluted) (Rmb)
EPS (basic pre-ex) (Rmb)
P/E (X)
P/B (X)
EV/EBITDA (X)
Dividend yield (%)
ROE (%)
CROCI (%)
5.70
4.44
7,037.5 / 1,147.5
--
12/12
0.40
(37.9)
0.40
0.40
27.8
2.0
8.6
0.9
7.3
16.9
12/13E
0.23
(40.6)
0.23
0.23
24.3
1.0
7.7
0.6
4.2
7.1
12/14E
0.20
(14.9)
0.20
0.20
28.5
1.0
8.0
0.6
3.5
6.5
12/15E
0.26
32.6
0.26
0.26
21.5
0.9
7.6
0.7
4.4
6.6
Price performance chart

12
2,800
11
2,700
10
2,600
2,500
2,400
2,300
2,200
5
Jul-12
Key risks
20th
Kailuan Energy Chemical (600997.SS)
2,100
Oct-12
Jan-13
Kailuan Energy Chemical (L)
Apr-13
Shanghai - Shenzhen 300 (R)
Upside risks are restarting acquisition of coal assets from the parent company
or better-than-expected coking coal prices.
Share price performance (%)
Absolute
Rel. to Shanghai - Shenzhen 300
3 month
(47.2)
(40.9)
6 month
(44.2)
(36.7)
12 month
(45.7)
(39.8)
Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 7/02/2013 close.
INVESTMENT LIST MEMBERSHIP

Asia Pacific Sell list
Coverage View: Neutral
24
2013 7 8
Kailuan Energy Chemical: Summary financials

Profit model (Rmb mn)
Total revenue
Cost of goods sold
SG&A
R&D
Other operating profit/(expense)
EBITDA
Depreciation & amortization
EBIT
Interest income
Interest expense
Income/(loss) from uncons. subs.
Others
Pretax profits
Income tax
Minorities
Net income pre-preferred dividends
Preferred dividends
Net income (pre-exceptionals)
Post-tax exceptionals
Net income
EPS (basic, pre-except) (Rmb)
EPS (basic, post-except) (Rmb)
EPS (diluted, post-except) (Rmb)
DPS (Rmb)
Dividend payout ratio (%)
Free cash flow yield (%)
Growth & margins (%)
Sales growth
EBITDA growth
EBIT growth
Net income growth
EPS growth
Gross margin
EBITDA margin
EBIT margin
Cash flow statement (Rmb mn)

D&A add-back
Minorities interests add-back
Net (inc)/dec working capital
Other operating cash flow
Cash flow from operations
Capital expenditures
Acquisitions
Divestitures
Others
Cash flow from investments
Dividends paid (common & pref)
Inc/(dec) in debt
Common stock issuance (repurchase)
Other financing cash flows
Cash flow from financing
Total cash flow
12/12
12/13E
12/14E
12/15E
19,091.3
(16,795.4)
(1,045.5)
-(129.8)
1,960.4
(839.8)
1,120.6
22.8
(451.7)
20.0
(0.4)
711.3
(199.4)
(24.0)
17,197.1
(15,473.1)
(941.7)
-(89.2)
1,517.4
(824.4)
693.1
21.3
(292.5)
0.0
(0.4)
421.4
(105.4)
(26.1)
16,849.3
(15,196.8)
(922.7)
-(87.4)
1,521.9
(879.6)
642.4
13.6
(292.5)
0.0
(0.4)
363.0
(90.8)
(25.6)
17,513.9
(15,709.9)
(959.1)
-(90.8)
1,689.6
(935.4)
754.1
10.3
(292.5)
0.0
(0.4)
471.5
(117.9)
(26.6)
487.9
0.0
487.9
0.0
487.9
289.9
0.0
289.9
0.0
289.9
246.6
0.0
246.6
0.0
246.6
327.0
0.0
327.0
0.0
327.0
0.40
0.40
0.40
0.10
25.3
(4.2)
0.23
0.23
0.23
0.04
15.7
(12.3)
0.20
0.20
0.20
0.03
15.7
(5.2)
0.26
0.26
0.26
0.04
15.7
(6.1)
12/12
(2.3)
(10.9)
(17.8)
(37.9)
(37.9)
12.0
10.3
5.9
12/13E
(9.9)
(22.6)
(38.2)
(40.6)
(40.6)
10.0
8.8
4.0
12/14E
(2.0)
0.3
(7.3)
(14.9)
(14.9)
9.8
9.0
3.8
12/15E
3.9
11.0
17.4
32.6
32.6
10.3
9.6
4.3
12/12
487.9
839.8
24.0
(886.6)
1,105.9
1,571.0
12/13E
289.9
824.4
26.1
(334.9)
0.0
805.6
12/14E
246.6
879.6
25.6
52.7
0.0
1,204.5
12/15E
327.0
935.4
26.6
(102.5)
0.0
1,186.6
(2,221.0)
0.0
0.1
0.0
(2,220.8)
(1,891.7)
0.0
0.0
0.0
(1,891.7)
(1,668.1)
0.0
0.0
0.0
(1,668.1)
(1,733.9)
0.0
0.0
0.0
(1,733.9)
(123.5)
1,772.9
0.0
(383.4)
1,266.1
616.2
(123.5)
0.0
0.0
0.0
(123.5)
(1,209.6)
(45.6)
0.0
0.0
0.0
(45.6)
(509.1)
(38.8)
0.0
0.0
0.0
(38.8)
(586.0)
Balance sheet (Rmb mn)
12/12
12/13E
12/14E
12/15E
Cash & equivalents

Accounts receivable
Inventory
Other current assets
Total current assets
Net PP&E
Net intangibles
Total investments
Other long-term assets
Total assets
3,346.4
4,294.5
1,609.9
0.0
9,250.8
10,663.6
795.0
223.3
113.8
21,046.6
2,136.8
4,240.4
1,695.7
0.0
8,072.9
11,770.6
755.3
223.3
113.8
20,936.0
1,627.7
4,154.6
1,665.4
0.0
7,447.7
12,598.8
715.7
223.3
113.8
21,099.3
1,041.7
4,318.5
1,721.6
0.0
7,081.9
13,436.8
676.0
223.3
113.8
21,531.9
Accounts payable
Short-term debt
Other current liabilities
Total current liabilities
Long-term debt
Other long-term liabilities
Total long-term liabilities
Total liabilities
3,851.3
3,356.4
0.0
7,207.7
1,551.7
3,623.4
5,175.2
12,382.9
3,548.1
3,356.4
0.0
6,904.5
1,551.7
3,623.4
5,175.2
12,079.7
3,484.8
3,356.4
0.0
6,841.2
1,551.7
3,623.4
5,175.2
12,016.4
3,602.4
3,356.4
0.0
6,958.8
1,551.7
3,623.4
5,175.2
12,134.0
0.0
6,873.6
1,790.0
0.0
7,040.1
1,816.2
0.0
7,241.2
1,841.8
0.0
7,529.4
1,868.4
21,046.6
20,936.0
21,099.3
21,531.9
5.57
5.70
5.86
6.10
Ratios
CROCI (%)
ROE (%)
ROA (%)
ROACE (%)
Inventory days
Receivables days
Payable days
Net debt/equity (%)
Interest cover - EBIT (X)
12/12
16.9
7.3
2.4
8.1
37.0
82.2
92.7
18.0
2.6
12/13E
7.1
4.2
1.4
4.8
39.0
90.6
87.3
31.3
2.6
12/14E
6.5
3.5
1.2
4.0
40.4
90.9
84.5
36.1
2.3
12/15E
6.6
4.4
1.5
4.4
39.3
88.3
82.3
41.1
2.7
Valuation
12/12
12/13E
12/14E
12/15E
27.8
2.0
8.6
0.9
0.9
24.3
1.0
7.7
0.6
0.6
28.5
1.0
8.0
0.6
0.6
21.5
0.9
7.6
0.5
0.7
Preferred shares
Total common equity
Minority interest
Total liabilities & equity
BVPS (Rmb)
P/E (analyst) (X)

P/B (X)
EV/EBITDA (X)
EV/GCI (X)
Dividend yield (%)
Note: Last actual year may include reported and estimated data.
Source: Company data, Goldman Sachs Research estimates.
25
2013 7 8
Yitai B/H (900948.SS/3948.HK): Down to Neutral on outperformance

What happened
Investment Profile
We downgrade Yitai B/H to Neutral from Buy. Based on our latest coal price
estimates, we lower our 2013E/14E/15E EPS by 23.2%/27.7%/28.2% to
Rmb2.85/3.00/3.29. Our new EV/EBITDA-based 12-month target prices are
US$5.08/HK$39.64, implying 5.2%/8.9% upside potential (our previous
Directors Cut-based 12-month target prices were US$6.49/HK$50.59). Since
we added Yitai B/H to our Buy list on October 30, 2012, the stock
performance has been -0.2%/1.6% vs. -2.8%/-12% for the Shanghai
Composite Index/Hang Seng China Enterprises Index.
Low
High
Growth
Growth
Returns *
Returns *
Current view
Weak demand to have an impact on the Inner Mongolia market. Inner
Mongolias coal output was 386mt in January-May, down 9.95% yoy vs. a
2.8% fall in nationwide output. This is mainly due to the relatively longer
distance to transport coal from Inner Mongolia and the lower calorific value at
some mines. We lower Yitais 2013 raw coal output forecast by 5.4% to
50.60mn tons.
Watch for progress on the coal-to-liquids project. Yitai CTL projects

production was 172k tons in 2012, with profit/t of about Rmb1,200. Shanghai
Securities News reported on March 29 that the National Development and
Reform Commission (NDRC) has issued permits for 10 large coal chemical
projects since March 2013, including 5 coal-to-natural gas projects, 4 coal-toolefin projects and 1 CTL project, which we believe shows the governments
more active attitude toward coal chemical projects.
Multiple
Multiple
Volatility
Volatility
Percentile
20th
40th
60th
80th
100th
Yitai Coal (900948.SS)


Key data
Current
Price ($)
12 month price target ($)
Market cap ($ mn / US$ mn)
EPS (Rmb)
EPS growth (%)
EPS (diluted) (Rmb)
P/E (X)
P/B (X)
EV/EBITDA (X)
Dividend yield (%)
ROE (%)
CROCI (%)
4.83
5.08
7,861.7 / 7,861.7
--
12/12
4.30
14.5
4.30
4.30
8.0
2.9
5.7
3.6
36.2
34.3
12/13E
2.85
(33.6)
2.85
2.85
10.4
2.2
6.6
3.0
22.1
24.1
12/14E
3.00
5.4
3.00
3.00
9.9
1.9
6.2
3.1
20.3
22.2
12/15E
3.29
9.4
3.29
3.29
9.0
1.6
5.6
3.4
19.3
21.3

6.0
3,000
Yitais coal production costs are at the low end of the industry and
are, thus, defensive when coal prices are weak. Yitais production costs
5.8
2,900
5.6
2,800
5.4
2,700
for salable coals were just Rmb95/t in 2012.
5.2
2,600
5.0
2,500
4.8
2,400
4.6
2,300
4.4
2,200
There are still new mines to come onstream in the future. The NDRC
approved Yitais 6mt Talahao mine in September 2012 and its parent
companys 15mt Hongqinghe mine in February 2013. In our view, these
projects could provide momentum for Yitais future development.
4.2
4.0
Jul-12
2,100
2,000
Oct-12
Jan-13
Yitai Coal (L)
Apr-13
Shanghai SE A Share Index (R)
Valuation is below industry average. Yitai B is trading at a 2013E

EV/EBITDA of 6.6X, slightly short of the industry average of 6.7X.
Key risks
Upside/downside risks are better/worse-than-expected thermal coal prices.

Absolute
Rel. to Shanghai SE A Share Index
3 month
(16.4)
(7.1)
6 month
(15.1)
(3.9)
12 month
(14.8)
(5.4)

Neutral
26
2013 7 8
Yitai Coal: Summary financials

12/12
12/13E
12/14E
12/15E
32,463.3
(20,238.0)
(2,825.6)
-(813.2)
10,185.9
(1,599.4)
8,586.5
35.0
(468.8)
0.0
565.6
8,718.3
(1,399.4)
(697.0)
27,163.2
(17,695.9)
(2,364.3)
-(757.4)
8,035.9
(1,690.2)
6,345.7
49.6
(563.1)
0.0
334.1
6,166.3
(989.8)
(536.8)
28,858.8
(18,999.9)
(2,511.8)
-(804.7)
8,378.1
(1,835.7)
6,542.4
54.4
(516.2)
0.0
334.1
6,414.8
(1,029.7)
(496.3)
30,935.5
(20,308.7)
(2,692.6)
-(862.6)
9,068.7
(1,997.0)
7,071.6
69.1
(516.2)
0.0
334.1
6,958.7
(1,117.0)
(494.6)
6,621.9
0.0
6,621.9
0.0
6,621.9
4,639.7
0.0
4,639.7
0.0
4,639.7
4,888.8
0.0
4,888.8
0.0
4,888.8
5,347.1
0.0
5,347.1
0.0
5,347.1
4.30
4.30
4.30
1.25
29.1
6.3
2.85
2.85
2.85
0.88
30.7
5.2
3.00
3.00
3.00
0.92
30.7
6.4
3.29
3.29
3.29
1.01
30.7
6.6
12/12
86.4
31.1
24.8
20.5
14.5
37.7
31.4
26.4
12/13E
(16.3)
(21.1)
(26.1)
(29.9)
(33.6)
34.9
29.6
23.4
12/14E
6.2
4.3
3.1
5.4
5.4
34.2
29.0
22.7
12/12
6,621.9
1,599.4
697.0
(791.1)
214.1
8,341.3
12/13E
4,639.7
1,690.2
536.8
(452.0)
240.8
6,655.6
Acquisitions
Divestitures
Others
(4,856.6)
0.0
225.4
(910.5)
(5,541.7)

Inc/(dec) in debt
Total cash flow
(2,196.0)
2,078.1
5,609.5
(6,415.9)
(924.3)
1,875.3
Total revenue
Cost of goods sold
SG&A
R&D
EBITDA
EBIT
Interest income
Interest expense
Others
Pretax profits
Income tax
Minorities
Preferred dividends
Net income
DPS (Rmb)
Sales growth
EBITDA growth
EBIT growth
Net income growth
EPS growth
Gross margin
EBITDA margin
EBIT margin

D&A add-back
12/12
12/13E
12/14E
12/15E
Cash & equivalents

Accounts receivable
Inventory
Net PP&E
Net intangibles
Total investments
Total assets
6,344.4
3,954.6
873.4
0.0
11,172.4
23,603.1
728.8
4,184.9
1,678.0
41,367.1
6,966.2
3,348.9
824.2
0.0
11,139.3
26,375.5
266.2
4,184.9
1,678.0
43,643.8
8,836.7
3,557.9
884.9
0.0
13,279.5
29,502.3
(196.5)
4,184.9
1,678.0
48,448.3
10,747.2
3,814.0
945.9
0.0
15,507.1
32,967.9
(659.1)
4,184.9
1,678.0
53,678.8
Accounts payable
Short-term debt
Long-term debt
Total liabilities
8,812.3
1,582.4
0.0
10,394.7
7,802.5
1,231.1
9,033.6
19,428.3
7,705.3
1,582.4
0.0
9,287.8
7,802.5
1,471.9
9,274.4
18,562.2
8,273.2
1,582.4
0.0
9,855.6
7,802.5
1,748.5
9,551.0
19,406.6
8,843.1
1,582.4
0.0
10,425.5
7,802.5
2,068.9
9,871.4
20,296.9
Preferred shares
Total common equity
Minority interest
0.0
19,699.4
2,239.5
0.0
22,305.4
2,776.2
0.0
25,769.2
3,272.6
0.0
29,614.8
3,767.1
41,367.1
43,643.8
48,448.3
53,678.8
BVPS (Rmb)
12.11
13.71
15.84
18.20
12/15E
7.2
8.2
8.1
9.4
9.4
34.4
29.3
22.9
Ratios
CROCI (%)
ROE (%)
ROA (%)
ROACE (%)
Inventory days
Receivables days
Payable days
Net debt/equity (%)
12/12
34.3
36.2
18.6
31.8
14.0
31.1
102.8
13.9
19.8
12/13E
24.1
22.1
10.9
21.4
17.5
49.1
170.3
9.6
12.4
12/14E
22.2
20.3
10.6
20.2
16.4
43.7
153.5
1.9
14.2
12/15E
21.3
19.3
10.5
20.2
16.5
43.5
153.8
(4.1)
15.8
12/14E
4,888.8
1,835.7
496.3
298.0
276.6
7,795.5
12/15E
5,347.1
1,997.0
494.6
252.9
320.4
8,412.0
Valuation
12/12
12/13E
12/14E
12/15E
8.0
2.9
5.7
2.0
3.6
10.4
2.2
6.6
1.6
3.0
9.9
1.9
6.2
1.4
3.1
9.0
1.6
5.6
1.2
3.4
(4,000.0)
0.0
0.0
0.0
(4,000.0)
(4,500.0)
0.0
0.0
0.0
(4,500.0)
(5,000.0)
0.0
0.0
0.0
(5,000.0)
(2,033.8)
0.0
0.0
0.0
(2,033.8)
621.8
(1,425.0)
0.0
0.0
0.0
(1,425.0)
1,870.5
(1,501.5)
0.0
0.0
0.0
(1,501.5)
1,910.5
P/E (analyst) (X)

P/B (X)
EV/EBITDA (X)
EV/GCI (X)
Dividend yield (%)
27
2013 7 8
5: Yitai H: Share price performance vs. peer group

Price current as of market close on July 2, 2013
Company
Ticker
Primary Analyst
Price
currency
Price as of
07/02/13
Price performance
since 10/30/12
3 month price
performance
6 month price
performance
12 month price
performance
HK$
Rmb
HK$
Rp
Rmb
HK$
Rmb
HK$
Bt
Rmb
Rmb
HK$
Rmb
Rp
Rmb
HK$
HK$
HK$
HK$
HK$
Rmb
HK$
$
NT$
Rs
Rmb
W
Rmb
HK$
Rmb
W
Rmb
HK$
Rmb
Rmb
W
RM
Rmb
HK$
HK$
Rmb
Rmb
W
$
Rp
Rp
Rp
Rp
Rp
Rmb
W
Rp
Rmb
Rmb
Rmb
Rmb
Rmb
Rmb
HK$
Bt
Bt
Rmb
Rmb
Rmb
HK$
$
Rmb
Rmb
HK$
Rmb
Rmb
HK$
43.40
4.57
3.25
1,230.00
3.35
4.93
15.71
25.00
398.00
4.66
5.47
6.44
10.23
570.00
6.74
7.73
3.18
9.78
4.71
5.13
21.69
31.40
18.03
26.25
368.90
8.04
13,350.00
13.10
1.96
12.26
81,300.00
19.92
19.42
8.63
8.75
441,000.00
10.26
1.90
2.09
3.92
7.56
8.35
319,500.00
74.23
1,350.00
2,650.00
40,000.00
22,500.00
14,300.00
7.92
25,850.00
17,050.00
36.47
15.38
16.96
15.85
11.23
7.38
2.89
390.00
390.00
16.21
12.23
16.02
11.82
4.83
12.22
13.06
13.04
14.64
3.58
3.08
1.6%
-5.4%
-3.8%
-4.7%
-2.3%
12.0%
-2.9%
-4.0%
1.5%
1.1%
-3.2%
-0.5%
-18.4%
-14.9%
-3.0%
2.9%
-1.5%
1.3%
-8.2%
-11.1%
-4.8%
-2.3%
4.9%
3.8%
5.1%
-11.9%
-2.6%
-13.6%
3.7%
-3.4%
4.0%
-4.5%
-2.4%
-26.0%
-6.8%
-0.5%
3.1%
-2.1%
10.0%
4.8%
-6.8%
-17.2%
-6.7%
-5.2%
-2.2%
-16.5%
-2.0%
3.9%
-9.8%
-20.8%
1.4%
14.8%
-4.4%
-15.7%
-10.2%
-5.8%
-10.4%
-1.3%
8.2%
-5.8%
-5.8%
-6.3%
-11.8%
-9.6%
2.6%
-10.3%
0.9%
-13.7%
1.9%
-7.9%
-6.0%
-1.3%
3.8%
-16.3%
5.9%
-1.6%
-6.4%
29.7%
18.2%
27.4%
-10.8%
6.9%
1.7%
35.6%
-14.2%
-14.9%
-1.2%
18.9%
9.7%
33.2%
35.0%
24.8%
1.2%
9.0%
3.9%
1.0%
2.6%
-12.6%
-17.3%
-5.6%
11.4%
-2.7%
-5.0%
-0.4%
13.6%
-30.2%
-6.6%
3.0%
3.6%
0.5%
34.8%
17.7%
-7.6%
-13.4%
-15.0%
-9.8%
-0.7%
-28.4%
6.5%
-3.2%
-2.1%
-29.2%
-26.2%
-6.1%
4.9%
-17.2%
-1.6%
-6.4%
-11.8%
-6.0%
39.6%
-19.4%
-19.4%
-5.8%
-13.8%
-8.5%
5.5%
-16.4%
-7.7%
-20.4%
25.6%
-0.7%
-4.3%
23.2%
NA
-34.1%
-4.1%
-7.5%
-21.9%
6.7%
-11.4%
1.6%
-16.0%
-4.9%
-35.6%
2.2%
-40.6%
-66.1%
-27.1%
5.5%
2.9%
0.0%
-18.7%
-12.3%
-18.7%
8.7%
-4.0%
-5.7%
14.6%
-37.8%
-19.6%
-43.1%
-21.6%
-27.7%
-7.0%
-24.5%
14.4%
-37.6%
-31.2%
21.5%
7.5%
-24.0%
5.0%
-27.4%
-35.9%
-40.4%
-10.9%
-2.7%
-16.1%
-2.8%
16.4%
2.7%
-12.3%
-47.9%
-34.6%
6.9%
6.0%
-45.9%
-32.4%
-42.6%
-40.1%
-22.1%
8.6%
-10.1%
-10.1%
-28.1%
-37.8%
-31.2%
-11.5%
-15.1%
-24.0%
-34.8%
35.1%
-5.7%
-13.5%
21.7%
NA
-42.9%
-12.2%
-23.6%
-33.3%
0.6%
-8.7%
0.4%
-27.4%
-7.0%
-44.1%
12.6%
-44.0%
-71.5%
-29.9%
-13.2%
-9.4%
5.4%
-20.2%
-7.4%
-17.1%
-5.6%
-4.6%
-8.6%
14.5%
-47.2%
-41.6%
-22.2%
-22.5%
-23.0%
-16.0%
-23.1%
8.4%
-44.1%
-37.7%
27.5%
39.4%
-33.1%
-7.9%
-35.1%
-41.8%
-36.5%
-14.1%
-7.8%
-28.9%
6.0%
5.0%
24.0%
-14.9%
-39.1%
-54.6%
44.5%
-2.8%
-39.9%
-17.9%
-36.2%
-40.6%
-24.7%
-1.4%
18.5%
18.5%
-17.2%
-36.5%
-40.7%
-35.1%
-14.8%
-25.0%
-29.6%
-5.0%
0.5%
-19.4%
-7.5%
9,204
-12.0%
-14.9%
-22.6%
-3.9%
Asia Pacific Metals & Mining Peer Group

Inner Mongolia Yitai Coal Co Ltd
3948.HK
Aluminum Corporation of China (A)
601600.SS
Aluminum Corporation of China (H)
2600.HK
Aneka Tambang Tbk PT
ANTM.JK
Angang Steel (A)
000898.SZ
Angang Steel (H)
0347.HK
Anhui Conch Cement (A)
600585.SS
Anhui Conch Cement (H)
0914.HK
BANP.BK
Baoshan Iron & Steel
600019.SS
BBMG Corporation (A)
601992.SS
BBMG Corporation (H)
2009.HK
Beijing Haohua Energy Resource
601101.SS
Bumi Resources
BUMI.JK
China Coal Energy (A)
601898.SS
China Coal Energy (H)
1898.HK
China Molybdenum Co.
3993.HK
China National Building Material
3323.HK
China Resources Cement Holdings
1313.HK
China Shanshui Cement Group
0691.HK
China Shenhua Energy (A)
601088.SS
China Shenhua Energy (H)
1088.HK
China Steel (GDR)
2002q.L
China Steel Corporation
2002.TW
Coal India Ltd.
COAL.BO
Datong Coal Industry
601001.SS
Dongkuk Steel Mill
001230.KS
Guizhou Panjiang Refined Coal
600395.SS
Hidili Industry International Developmen1393.HK
002128.SZ
Hyundai Steel
004020.KS
Jiangxi Copper (A)
600362.SS
Jiangxi Copper (H)
0358.HK
000937.SZ
600997.SS
Korea Zinc
010130.KS
Lafarge Malayan Cement Berhad
LMCE.KL
Maanshan Iron & Steel (A)
600808.SS
Maanshan Iron & Steel (H)
0323.HK
Mongolian Mining Corp.
0975.HK
Pingdingshan Tianan Coal Mining
601666.SS
Pingzhuang Energy Resources
000780.SZ
POSCO
005490.KS
POSCO (ADR)
PKX
PT Adaro Energy Tbk
ADRO.JK
PT Holcim Indonesia Tbk
SMCB.JK
PT Indo Tambangraya Megah
ITMG.JK
PT Indocement Tunggal Prakarsa Tbk INTP.JK
PT Tambang Batubara Bukit Asam
PTBA.JK
SDIC Xinji Energy Co.
601918.SS
SeAH Besteel Corp.
001430.KS
Semen Indonesia Persero Tbk
SMGR.JK
Shandong Gold Mining Co
600547.SS
Shanxi Coal International Energy Group600546.SS
Shanxi Lanhua Sci-Tech Venture
600123.SS
Shanxi Lu'an Environmental Energy De 601699.SS
Shanxi Xishan Coal and Electricity Pow 000983.SZ
Shenzhen Zhongjin Lingnan Nonfemet 000060.SZ
Shougang Fushan Resources Group 0639.HK
Siam City Cement Public Co.
SCCC.BK
SCCCn.BK
Tongling Nonferrous Metals Group Co. 000630.SZ
Yangquan Coal Industry Group
600348.SS
Yanzhou Coal Mining (A)
600188.SS
Yanzhou Coal Mining (H)
1171.HK
Yitai Coal
900948.SS
Yunnan Chihong Zinc & Germanium
600497.SS
Yunnan Copper Co.
000878.SZ
Zhaojin Mining Industry
1818.HK
Zhongjin Gold
600489.SS
Zijin Mining (A)
601899.SS
Zijin Mining(H)
2899.HK
Hang Seng China Ent. Index
Yong Han, CFA

Julian Zhu
Julian Zhu
Nikhil Bhandari
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Nikhil Bhandari
Julian Zhu
Julian Zhu
Julian Zhu
Yong Han, CFA
Nikhil Bhandari
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Tommy Wong
Tommy Wong
Durga Dath
Yong Han, CFA
Seung Shin
Yong Han, CFA
Julian Zhu
Yong Han, CFA
Seung Shin
Julian Zhu
Julian Zhu
Yong Han, CFA
Yong Han, CFA
Seung Shin
Ishan Sethi
Julian Zhu
Julian Zhu
Julian Zhu
Yong Han, CFA
Yong Han, CFA
Seung Shin
Seung Shin
Nikhil Bhandari
Ishan Sethi
Nikhil Bhandari
Ishan Sethi
Nikhil Bhandari
Yong Han, CFA
Seung Shin
Ishan Sethi
Jefferson Zhang
Yong Han, CFA
Yong Han, CFA
Yong Han, CFA
Yong Han, CFA
Investment Research
Julian Zhu
Ishan Sethi
Ishan Sethi
Investment Research
Yong Han, CFA
Julian Zhu
Julian Zhu
Yong Han, CFA
Investment Research
Investment Research
Julian Zhu
Jefferson Zhang
Julian Zhu
Julian Zhu
Note: Prices as of most recent available close, which could vary from the price date indicated above.
This table shows movement in absolute share price and not total shareholder return. Results presented should not and cannot be viewed as an indicator of future performance.
Source: FactSet, Quantum database.
28
2013 7 8
6: Yitai B: Share price performance vs. peer group

Company
Ticker
Primary Analyst
Price
currency
Price as of
07/02/13
Price performance
since 10/30/12
3 month price
performance
6 month price
performance
12 month price
performance
$
Rmb
HK$
Rp
Rmb
HK$
Rmb
HK$
Bt
Rmb
Rmb
HK$
Rmb
Rp
Rmb
HK$
HK$
HK$
HK$
HK$
Rmb
HK$
$
NT$
Rs
Rmb
W
Rmb
HK$
Rmb
W
HK$
Rmb
HK$
Rmb
Rmb
W
RM
Rmb
HK$
HK$
Rmb
Rmb
W
$
Rp
Rp
Rp
Rp
Rp
Rmb
W
Rp
Rmb
Rmb
Rmb
Rmb
Rmb
Rmb
HK$
Bt
Bt
Rmb
Rmb
Rmb
HK$
Rmb
Rmb
HK$
Rmb
Rmb
HK$
5.37
4.57
3.25
1,230.00
3.35
4.93
15.71
25.00
398.00
4.66
5.47
6.44
10.23
570.00
6.74
7.73
3.18
9.78
4.71
5.13
21.69
31.40
18.03
26.25
368.90
8.04
13,350.00
13.10
1.96
12.26
81,300.00
43.40
19.92
19.42
8.63
8.75
441,000.00
10.26
1.90
2.09
3.92
7.56
8.35
319,500.00
74.23
1,350.00
2,650.00
40,000.00
22,500.00
14,300.00
7.92
25,850.00
17,050.00
36.47
15.38
16.96
15.85
11.23
7.38
2.89
390.00
390.00
16.21
12.23
16.02
11.82
12.22
13.06
13.04
14.64
3.58
3.08
-0.2%
-5.4%
-3.8%
-4.7%
-2.3%
12.0%
-2.9%
-4.0%
1.5%
1.1%
-3.2%
-0.5%
-18.4%
-14.9%
-3.0%
2.9%
-1.5%
1.3%
-8.2%
-11.1%
-4.8%
-2.3%
4.9%
3.8%
5.1%
-11.9%
-2.6%
-13.6%
3.7%
-3.4%
4.0%
1.6%
-4.5%
-2.4%
-26.0%
-6.8%
-0.5%
3.1%
-2.1%
10.0%
4.8%
-6.8%
-17.2%
-6.7%
-5.2%
-2.2%
-16.5%
-2.0%
3.9%
-9.8%
-20.8%
1.4%
14.8%
-4.4%
-15.7%
-10.2%
-5.8%
-10.4%
-1.3%
8.2%
-5.8%
-5.8%
-6.3%
-11.8%
-9.6%
2.6%
0.9%
-13.7%
1.9%
-7.9%
-6.0%
-1.3%
-1.1%
-16.3%
5.9%
-1.6%
-6.4%
29.7%
18.2%
27.4%
-10.8%
6.9%
1.7%
35.6%
-14.2%
-14.9%
-1.2%
18.9%
9.7%
33.2%
35.0%
24.8%
1.2%
9.0%
3.9%
1.0%
2.6%
-12.6%
-17.3%
-5.6%
11.4%
-2.7%
-5.0%
3.8%
-0.4%
13.6%
-30.2%
-6.6%
3.0%
3.6%
0.5%
34.8%
17.7%
-7.6%
-13.4%
-15.0%
-9.8%
-0.7%
-28.4%
6.5%
-3.2%
-2.1%
-29.2%
-26.2%
-6.1%
4.9%
-17.2%
-1.6%
-6.4%
-11.8%
-6.0%
39.6%
-19.4%
-19.4%
-5.8%
-13.8%
-8.5%
5.5%
-7.7%
-20.4%
25.6%
-0.7%
-4.3%
23.2%
2.2%
-34.1%
-4.1%
-7.5%
-21.9%
6.7%
-11.4%
1.6%
-16.0%
-4.9%
-35.6%
2.2%
-40.6%
-66.1%
-27.1%
5.5%
2.9%
0.0%
-18.7%
-12.3%
-18.7%
8.7%
-4.0%
-5.7%
14.6%
-37.8%
-19.6%
-43.1%
-21.6%
-27.7%
-7.0%
NA
-24.5%
14.4%
-37.6%
-31.2%
21.5%
7.5%
-24.0%
5.0%
-27.4%
-35.9%
-40.4%
-10.9%
-2.7%
-16.1%
-2.8%
16.4%
2.7%
-12.3%
-47.9%
-34.6%
6.9%
6.0%
-45.9%
-32.4%
-42.6%
-40.1%
-22.1%
8.6%
-10.1%
-10.1%
-28.1%
-37.8%
-31.2%
-11.5%
-24.0%
-34.8%
35.1%
-5.7%
-13.5%
21.7%
-2.2%
-42.9%
-12.2%
-23.6%
-33.3%
0.6%
-8.7%
0.4%
-27.4%
-7.0%
-44.1%
12.6%
-44.0%
-71.5%
-29.9%
-13.2%
-9.4%
5.4%
-20.2%
-7.4%
-17.1%
-5.6%
-4.6%
-8.6%
14.5%
-47.2%
-41.6%
-22.2%
-22.5%
-23.0%
-16.0%
NA
-23.1%
8.4%
-44.1%
-37.7%
27.5%
39.4%
-33.1%
-7.9%
-35.1%
-41.8%
-36.5%
-14.1%
-7.8%
-28.9%
6.0%
5.0%
24.0%
-14.9%
-39.1%
-54.6%
44.5%
-2.8%
-39.9%
-17.9%
-36.2%
-40.6%
-24.7%
-1.4%
18.5%
18.5%
-17.2%
-36.5%
-40.7%
-35.1%
-25.0%
-29.6%
-5.0%
0.5%
-19.4%
-7.5%
2,100
-2.8%
-9.9%
-11.6%
-9.9%

Yitai Coal
900948.SS
601600.SS
2600.HK
ANTM.JK
Angang Steel (A)
000898.SZ
Angang Steel (H)
0347.HK
600585.SS
0914.HK
BANP.BK
600019.SS
601992.SS
2009.HK
601101.SS
Bumi Resources
BUMI.JK
601898.SS
1898.HK
3993.HK
3323.HK
1313.HK
0691.HK
601088.SS
1088.HK
China Steel (GDR)
2002q.L
2002.TW
Coal India Ltd.
COAL.BO
601001.SS
Dongkuk Steel Mill
001230.KS
600395.SS
002128.SZ
Hyundai Steel
004020.KS
3948.HK
Jiangxi Copper (A)
600362.SS
Jiangxi Copper (H)
0358.HK
000937.SZ
600997.SS
Korea Zinc
010130.KS
LMCE.KL
600808.SS
0323.HK
0975.HK
601666.SS
000780.SZ
POSCO
005490.KS
POSCO (ADR)
PKX
PT Adaro Energy Tbk
ADRO.JK
SMCB.JK
ITMG.JK
PTBA.JK
601918.SS
SeAH Besteel Corp.
001430.KS
SMGR.JK
600547.SS
600123.SS
SCCC.BK
SCCCn.BK
600348.SS
600188.SS
1171.HK
600497.SS
Yunnan Copper Co.
000878.SZ
1818.HK
Zhongjin Gold
600489.SS
Zijin Mining (A)
601899.SS
Zijin Mining(H)
2899.HK
Shanghai SE A Share Index
Yong Han, CFA

Julian Zhu
Julian Zhu
Nikhil Bhandari
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Nikhil Bhandari
Julian Zhu
Julian Zhu
Julian Zhu
Yong Han, CFA
Nikhil Bhandari
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Tommy Wong
Tommy Wong
Durga Dath
Yong Han, CFA
Seung Shin
Yong Han, CFA
Julian Zhu
Yong Han, CFA
Seung Shin
Yong Han, CFA
Julian Zhu
Julian Zhu
Yong Han, CFA
Yong Han, CFA
Seung Shin
Ishan Sethi
Julian Zhu
Julian Zhu
Julian Zhu
Yong Han, CFA
Yong Han, CFA
Seung Shin
Seung Shin
Nikhil Bhandari
Ishan Sethi
Nikhil Bhandari
Ishan Sethi
Nikhil Bhandari
Yong Han, CFA
Seung Shin
Ishan Sethi
Jefferson Zhang
Yong Han, CFA
Yong Han, CFA
Yong Han, CFA
Yong Han, CFA
Investment Research
Julian Zhu
Ishan Sethi
Ishan Sethi
Investment Research
Yong Han, CFA
Julian Zhu
Julian Zhu
Investment Research
Investment Research
Julian Zhu
Jefferson Zhang
Julian Zhu
Julian Zhu
29
2013 7 8
Jizhong (000937.SZ): Acquisition progress unlikely; down to Neutral

What happened
Investment Profile
We downgrade Jizhong to Neutral from Buy. Based on our latest coal price
Rmb0.73/0.64/0.70. Our new EV/EBITDA-based 12-month target price is
Rmb8.73, implying 1.2% upside potential (our previous Directors Cut-based
12-month target price was Rmb16.71). Since we added Jizhong to our Buy
list on December 4, 2012, the shares have fallen 14.6% vs. a 4.2% rise for
the Shanghai - Shenzhen 300 index given the weak coking coal price.
Low
High
Growth
Growth
Returns *
Returns *
Current view
Weakened coking coal prices to impact earnings. With the impact from
tighter real estate regulatory policies and concerns over a slowdown in
economic recovery after the Chinese New Year, coke prices have been
trending down amid lukewarm purchasing demand from steelmakers. Since
the beginning of the year, coking coal prices in Xingtai, where Jizhong is
located, have declined 13.4% to Rmb970/t from Rmb1120/t.
Asset injection unlikely to make progress in the near term. We expect

further asset injections from Jizhong Group as conditions mature, based on
the parent companys prior commitment to avoiding horizontal competition.
However, as falling coal prices have substantially undermined the parent
companys profitability, we believe the likelihood for any progress in asset
injection from the parent would be small in 2013.
Valuation below industry average. Jizhong is trading at a 2013E

EV/EBITDA of 5.3X, below the industry average of 6.7X.
Key risks
Upside/downside risks are better/worse-than-expected coking coal prices.

Neutral
Multiple
Multiple
Volatility
Volatility
Percentile
20th
40th
60th
80th
100th
Jizhong Energy Resources (000937.SZ)


Key data
Current
Price (Rmb)
EPS (Rmb)
EPS growth (%)
EPS (diluted) (Rmb)
P/E (X)
P/B (X)
EV/EBITDA (X)
Dividend yield (%)
ROE (%)
CROCI (%)
8.63
8.73
19,960.2 / 3,254.6
--
12/12
0.97
(26.2)
0.97
0.97
16.3
2.4
7.8
1.6
15.4
15.8
12/13E
0.73
(25.2)
0.73
0.73
11.9
1.2
5.3
2.2
10.8
12.8
12/14E
0.64
(11.5)
0.64
0.64
13.4
1.2
5.2
1.9
9.0
11.9
12/15E
0.70
8.0
0.70
0.70
12.4
1.1
4.6
2.1
9.1
11.7

18
3,100
17
3,000
16
2,900
15
2,800
14
2,700
13
2,600
12
2,500
11
2,400
10
2,300
9
8
Jul-12
2,200
2,100
Oct-12
Jan-13
Jizhong Energy Resources (L)
Apr-13

Absolute
3 month
(30.2)
(21.9)
6 month
(37.6)
(29.1)
12 month
(44.1)
(38.0)
30
2013 7 8
Jizhong Energy Resources: Summary financials

12/12
12/13E
12/14E
12/15E
30,072.4
(21,644.6)
(4,251.7)
-(562.8)
5,519.2
(1,905.9)
3,613.3
126.7
(797.6)
53.1
184.6
3,180.1
(865.4)
(64.2)
27,227.4
(20,551.3)
(3,539.6)
-(304.2)
4,814.7
(1,982.4)
2,832.3
99.8
(819.2)
30.0
184.6
2,327.6
(574.4)
(69.8)
26,815.9
(20,492.6)
(3,486.1)
-(299.6)
4,620.6
(2,083.0)
2,537.6
130.5
(819.2)
33.0
184.6
2,066.6
(508.4)
(68.7)
27,509.0
(20,970.6)
(3,576.2)
-(307.3)
4,822.2
(2,167.4)
2,654.8
169.5
(819.2)
36.3
184.6
2,226.1
(547.4)
(70.5)
2,250.6
0.0
2,250.6
0.0
2,250.6
1,683.4
0.0
1,683.4
0.0
1,683.4
1,489.5
0.0
1,489.5
0.0
1,489.5
1,608.1
0.0
1,608.1
0.0
1,608.1
0.97
0.97
0.97
0.25
25.7
(2.1)
0.73
0.73
0.73
0.19
25.7
8.0
0.64
0.64
0.64
0.17
25.7
8.8
0.70
0.70
0.70
0.18
25.7
9.3
12/12
(20.0)
(10.1)
(20.6)
(26.2)
(26.2)
28.0
18.4
12.0
12/13E
(9.5)
(12.8)
(21.6)
(25.2)
(25.2)
24.5
17.7
10.4
12/14E
(1.5)
(4.0)
(10.4)
(11.5)
(11.5)
23.6
17.2
9.5
12/15E
2.6
4.4
4.6
8.0
8.0
23.8
17.5
9.7

D&A add-back
12/12
2,250.6
1,905.9
64.2
(2,762.2)
1,003.1
2,461.5
12/13E
1,683.4
1,982.4
69.8
117.6
996.5
4,849.8
12/14E
1,489.5
2,083.0
68.7
126.2
1,090.4
4,857.8
12/15E
1,608.1
2,167.4
70.5
(80.9)
1,145.2
4,910.3
Acquisitions
Divestitures
Others
(3,294.9)
0.0
141.8
512.1
(2,641.0)
(2,983.1)
0.0
0.0
0.0
(2,983.1)
(2,791.2)
0.0
0.0
0.0
(2,791.2)
(2,720.1)
0.0
0.0
0.0
(2,720.1)

Inc/(dec) in debt
Total cash flow
(578.2)
311.3
0.0
(818.2)
(1,085.0)
(1,264.4)
(578.2)
0.0
0.0
0.0
(578.2)
1,288.4
(432.5)
0.0
0.0
0.0
(432.5)
1,634.2
(382.7)
0.0
0.0
0.0
(382.7)
1,807.5
Total revenue
Cost of goods sold
SG&A
R&D
EBITDA
EBIT
Interest income
Interest expense
Others
Pretax profits
Income tax
Minorities
Preferred dividends
Net income
DPS (Rmb)
Sales growth
EBITDA growth
EBIT growth
Net income growth
EPS growth
Gross margin
EBITDA margin
EBIT margin
12/12
12/13E
12/14E
12/15E
Cash & equivalents

Accounts receivable
Inventory
Net PP&E
Net intangibles
Total investments
Total assets
4,186.7
10,243.7
1,018.4
707.7
16,156.4
15,303.1
6,924.4
636.3
1,087.3
40,107.5
5,475.1
9,697.4
1,013.5
707.7
16,893.7
16,560.9
6,667.3
666.3
1,087.3
41,875.5
7,109.3
9,550.9
1,010.6
707.7
18,378.4
17,526.2
6,410.2
699.3
1,087.3
44,101.3
8,916.8
9,797.7
1,034.2
707.7
20,456.3
18,336.0
6,153.1
735.6
1,087.3
46,768.3
Accounts payable
Short-term debt
Long-term debt
Total liabilities
8,583.4
5,269.3
53.1
13,905.8
2,335.1
5,640.7
7,975.8
21,881.6
8,149.8
5,269.3
53.1
13,472.3
2,335.1
6,667.2
9,002.3
22,474.6
8,126.6
5,269.3
53.1
13,449.0
2,335.1
7,790.6
10,125.8
23,574.8
8,316.1
5,269.3
53.1
13,638.6
2,335.1
8,972.1
11,307.2
24,945.8
Preferred shares
Total common equity
Minority interest
0.0
14,968.9
3,257.0
0.0
16,074.0
3,326.8
0.0
17,131.0
3,395.5
0.0
18,356.5
3,466.0
40,107.5
41,875.5
44,101.3
46,768.3
6.47
6.95
7.41
7.94
Ratios
CROCI (%)
ROE (%)
ROA (%)
ROACE (%)
Inventory days
Receivables days
Payable days
Net debt/equity (%)
12/12
15.8
15.4
5.8
14.1
18.7
120.4
154.4
18.8
5.4
12/13E
12.8
10.8
4.1
10.6
18.0
133.7
148.6
11.0
3.9
12/14E
11.9
9.0
3.5
9.8
18.0
131.0
145.0
2.4
3.7
12/15E
11.7
9.1
3.5
10.4
17.8
128.4
143.1
(6.0)
4.1
Valuation
12/12
12/13E
12/14E
12/15E
16.3
2.4
7.8
1.1
1.6
11.9
1.2
5.3
0.6
2.2
13.4
1.2
5.2
0.5
1.9
12.4
1.1
4.6
0.5
2.1
BVPS (Rmb)
P/E (analyst) (X)

P/B (X)
EV/EBITDA (X)
EV/GCI (X)
Dividend yield (%)
31
2013 7 8
7: Jizhong: Share price performance vs. peer group

Company
Ticker
Primary Analyst
Price
currency
Price as of
07/02/13
Price performance
since 12/04/12
3 month price
performance
6 month price
performance
12 month price
performance
Rmb
Rmb
HK$
Rp
Rmb
HK$
Rmb
HK$
Bt
Rmb
Rmb
HK$
Rmb
Rp
Rmb
HK$
HK$
HK$
HK$
HK$
Rmb
HK$
$
NT$
Rs
Rmb
W
Rmb
HK$
Rmb
W
HK$
Rmb
HK$
Rmb
W
RM
Rmb
HK$
HK$
Rmb
Rmb
W
$
Rp
Rp
Rp
Rp
Rp
Rmb
W
Rp
Rmb
Rmb
Rmb
Rmb
Rmb
Rmb
HK$
Bt
Bt
Rmb
Rmb
Rmb
HK$
$
Rmb
Rmb
HK$
Rmb
Rmb
HK$
8.63
4.57
3.25
1,230.00
3.35
4.93
15.71
25.00
398.00
4.66
5.47
6.44
10.23
570.00
6.74
7.73
3.18
9.78
4.71
5.13
21.69
31.40
18.03
26.25
368.90
8.04
13,350.00
13.10
1.96
12.26
81,300.00
36.40
19.92
19.42
8.75
441,000.00
10.26
1.90
2.09
3.92
7.56
8.35
319,500.00
74.23
1,350.00
2,650.00
40,000.00
22,500.00
14,300.00
7.92
25,850.00
17,050.00
36.47
15.38
16.96
15.85
11.23
7.38
2.89
390.00
390.00
16.21
12.23
16.02
11.82
4.83
12.22
13.06
13.04
14.64
3.58
3.08
-14.6%
-1.9%
-1.2%
-3.9%
-2.0%
2.5%
-5.4%
-3.8%
2.8%
0.6%
-4.7%
-2.0%
-0.5%
1.8%
-0.7%
2.8%
-0.6%
-3.9%
-1.9%
-3.6%
0.6%
2.1%
0.0%
0.2%
1.4%
2.7%
3.1%
2.1%
2.6%
4.2%
3.6%
-15.5%
-1.8%
-1.6%
2.6%
1.6%
8.5%
1.1%
3.0%
4.5%
2.3%
2.6%
0.3%
0.6%
0.7%
-25.4%
3.8%
-2.6%
2.5%
3.9%
2.0%
13.7%
4.2%
2.6%
2.7%
1.6%
5.8%
0.1%
0.0%
-7.1%
-7.1%
-2.2%
7.5%
3.2%
0.7%
-12.4%
1.4%
-0.5%
-1.5%
0.5%
1.4%
0.7%
-30.2%
-16.3%
5.9%
-1.6%
-6.4%
29.7%
18.2%
27.4%
-10.8%
6.9%
1.7%
35.6%
-14.2%
-14.9%
-1.2%
18.9%
9.7%
33.2%
35.0%
24.8%
1.2%
9.0%
3.9%
1.0%
2.6%
-12.6%
-17.3%
-5.6%
11.4%
-2.7%
-5.0%
-16.2%
-0.4%
13.6%
-6.6%
3.0%
3.6%
0.5%
34.8%
17.7%
-7.6%
-13.4%
-15.0%
-9.8%
-0.7%
-28.4%
6.5%
-3.2%
-2.1%
-29.2%
-26.2%
-6.1%
4.9%
-17.2%
-1.6%
-6.4%
-11.8%
-6.0%
39.6%
-19.4%
-19.4%
-5.8%
-13.8%
-8.5%
5.5%
-16.4%
-7.7%
-20.4%
25.6%
-0.7%
-4.3%
23.2%
-37.6%
-34.1%
-4.1%
-7.5%
-21.9%
6.7%
-11.4%
1.6%
-16.0%
-4.9%
-35.6%
2.2%
-40.6%
-66.1%
-27.1%
5.5%
2.9%
0.0%
-18.7%
-12.3%
-18.7%
8.7%
-4.0%
-5.7%
14.6%
-37.8%
-19.6%
-43.1%
-21.6%
-27.7%
-7.0%
-18.3%
-24.5%
14.4%
-31.2%
21.5%
7.5%
-24.0%
5.0%
-27.4%
-35.9%
-40.4%
-10.9%
-2.7%
-16.1%
-2.8%
16.4%
2.7%
-12.3%
-47.9%
-34.6%
6.9%
6.0%
-45.9%
-32.4%
-42.6%
-40.1%
-22.1%
8.6%
-10.1%
-10.1%
-28.1%
-37.8%
-31.2%
-11.5%
-15.1%
-24.0%
-34.8%
35.1%
-5.7%
-13.5%
21.7%
-44.1%
-42.9%
-12.2%
-23.6%
-33.3%
0.6%
-8.7%
0.4%
-27.4%
-7.0%
-44.1%
12.6%
-44.0%
-71.5%
-29.9%
-13.2%
-9.4%
5.4%
-20.2%
-7.4%
-17.1%
-5.6%
-4.6%
-8.6%
14.5%
-47.2%
-41.6%
-22.2%
-22.5%
-23.0%
-16.0%
NA
-23.1%
8.4%
-37.7%
27.5%
39.4%
-33.1%
-7.9%
-35.1%
-41.8%
-36.5%
-14.1%
-7.8%
-28.9%
6.0%
5.0%
24.0%
-14.9%
-39.1%
-54.6%
44.5%
-2.8%
-39.9%
-17.9%
-36.2%
-40.6%
-24.7%
-1.4%
18.5%
18.5%
-17.2%
-36.5%
-40.7%
-35.1%
-14.8%
-25.0%
-29.6%
-5.0%
0.5%
-19.4%
-7.5%
2,222
4.2%
-10.6%
-11.9%
-9.9%

000937.SZ
601600.SS
2600.HK
ANTM.JK
Angang Steel (A)
000898.SZ
Angang Steel (H)
0347.HK
600585.SS
0914.HK
BANP.BK
600019.SS
601992.SS
2009.HK
601101.SS
Bumi Resources
BUMI.JK
601898.SS
1898.HK
3993.HK
3323.HK
1313.HK
0691.HK
601088.SS
1088.HK
China Steel (GDR)
2002q.L
2002.TW
Coal India Ltd.
COAL.BO
601001.SS
Dongkuk Steel Mill
001230.KS
600395.SS
002128.SZ
Hyundai Steel
004020.KS
3948.HK
Jiangxi Copper (A)
600362.SS
Jiangxi Copper (H)
0358.HK
600997.SS
Korea Zinc
010130.KS
LMCE.KL
600808.SS
0323.HK
0975.HK
601666.SS
000780.SZ
POSCO
005490.KS
POSCO (ADR)
PKX
PT Adaro Energy Tbk
ADRO.JK
SMCB.JK
ITMG.JK
PTBA.JK
601918.SS
SeAH Besteel Corp.
001430.KS
SMGR.JK
600547.SS
600123.SS
SCCC.BK
SCCCn.BK
600348.SS
600188.SS
1171.HK
Yitai Coal
900948.SS
600497.SS
Yunnan Copper Co.
000878.SZ
1818.HK
Zhongjin Gold
600489.SS
Zijin Mining (A)
601899.SS
Zijin Mining(H)
2899.HK
Shanghai - Shenzhen 300
Yong Han, CFA

Julian Zhu
Julian Zhu
Nikhil Bhandari
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Nikhil Bhandari
Julian Zhu
Julian Zhu
Julian Zhu
Yong Han, CFA
Nikhil Bhandari
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Tommy Wong
Tommy Wong
Durga Dath
Yong Han, CFA
Seung Shin
Yong Han, CFA
Julian Zhu
Yong Han, CFA
Seung Shin
Yong Han, CFA
Julian Zhu
Julian Zhu
Yong Han, CFA
Seung Shin
Ishan Sethi
Julian Zhu
Julian Zhu
Julian Zhu
Yong Han, CFA
Yong Han, CFA
Seung Shin
Seung Shin
Nikhil Bhandari
Ishan Sethi
Nikhil Bhandari
Ishan Sethi
Nikhil Bhandari
Yong Han, CFA
Seung Shin
Ishan Sethi
Jefferson Zhang
Yong Han, CFA
Yong Han, CFA
Yong Han, CFA
Yong Han, CFA
Investment Research
Julian Zhu
Ishan Sethi
Ishan Sethi
Investment Research
Yong Han, CFA
Julian Zhu
Julian Zhu
Yong Han, CFA
Investment Research
Investment Research
Julian Zhu
Jefferson Zhang
Julian Zhu
Julian Zhu
32
2013 7 8
Pingdingshan (601666.SS): Pessimism looks priced in; up to

Neutral
33
2013 7 8
What happened
Investment Profile
We upgrade Pingdingshan to Neutral from Sell. Based on our latest coal price
Rmb0.22/0.13/0.10. Our new EV/EBITDA-based 12-month target price is
Rmb4.83, implying 6.0% downside potential (our previous Directors Cutbased 12-month target price was Rmb4.99). Since we added Pingdingshan to
our Sell list on December 4, 2012, the stock has risen 2.3% vs. a 4.2% rise
for the Shanghai - Shenzhen 300 index.
Low
High
Growth
Growth
Returns *
Returns *
Current view
Falling coking coal prices to weigh on earnings. With the impact from
tighter real estate regulatory policies and concerns over a slowdown in
economic recovery after the Chinese New Year, coke prices have been
trending down amid lukewarm purchasing demand from steelmakers. Since
the beginning of the year, coking coal prices in Pingdingshan, where the firm
is located, have declined 10.8% to Rmb1160/t from Rmb1,320/t.
Pingdingshan lacks apparent growth potential. The firm has neither

large mines under construction, nor high-quality coal assets available for
injection from the parent company. Its parent company, China Pingmei
Shenma Group, reported net losses of Rmb539mn in 2012, and a net loss of
Rmb134mn in 1Q2013.
Pingdingshan has a heavy burden from personnel. At end- 2012,

Pingdingshan has 85,711 of on-job employees vs. 35,523 of retired
employees, who also need to be paid.
Multiple
Multiple
Volatility
Volatility
Percentile
20th
40th
60th
80th
100th
Pingdingshan Tianan Coal Mining (601666.SS)


Key data
Current
Price (Rmb)
EPS (Rmb)
EPS growth (%)
EPS (diluted) (Rmb)
P/E (X)
P/B (X)
EV/EBITDA (X)
Dividend yield (%)
ROE (%)
CROCI (%)
5.14
4.83
12,136.4 / 1,978.9
--
12/12
0.47
(39.2)
0.47
0.47
21.3
2.1
7.4
1.4
10.4
14.0
12/13E
0.22
(53.1)
0.22
0.22
23.1
1.1
5.1
1.3
4.7
10.3
12/14E
0.13
(41.5)
0.13
0.13
39.5
1.1
5.7
0.8
2.7
8.6
12/15E
0.10
(25.7)
0.10
0.10
53.1
1.0
5.8
0.6
2.0
7.7

11
3,300
10
3,100
2,900
2,700
Key risks
2,500
Upside/downside risks are better/worse-than-expected coking coal prices.
2,300
Valuation below industry average. Pingdingshan is trading at 5.1X 2013E

EV/EBITDA, below industry average of 6.7X.
5
Jul-12
2,100
Oct-12
Jan-13
Pingdingshan Tianan Coal Mining (L)
Apr-13

Neutral

Absolute
3 month
(31.8)
(23.7)
6 month
(39.8)
(31.7)
12 month
(49.0)
(43.4)
34
2013 7 8
Pingdingshan Tianan Coal Mining: Summary financials

Total revenue
Cost of goods sold
SG&A
R&D
EBITDA
EBIT
Interest income
Interest expense
Others
Pretax profits
Income tax
Minorities
Preferred dividends
Net income
DPS (Rmb)
Sales growth
EBITDA growth
EBIT growth
Net income growth
EPS growth
Gross margin
EBITDA margin
EBIT margin

D&A add-back
Acquisitions
Divestitures
Others
Inc/(dec) in debt
Total cash flow
12/12
12/13E
12/14E
12/15E
22,169.4
(17,891.6)
(2,397.4)
-(402.3)
3,377.0
(1,899.0)
1,478.1
48.9
(108.5)
2.2
21.0
1,441.6
(271.3)
(48.9)
20,870.2
(17,649.2)
(2,087.0)
-(345.6)
2,673.9
(1,885.5)
788.4
34.0
(123.2)
0.0
21.0
720.2
(135.7)
(58.6)
21,837.3
(18,765.7)
(2,183.7)
-(361.6)
2,380.6
(1,854.3)
526.3
30.4
(123.2)
0.0
21.0
454.5
(85.7)
(61.3)
23,655.0
(20,465.3)
(2,365.5)
-(391.7)
2,254.7
(1,822.1)
432.6
33.1
(123.2)
0.0
21.0
363.5
(68.5)
(66.4)
1,121.4
0.0
1,121.4
0.0
1,121.4
525.9
0.0
525.9
0.0
525.9
307.5
0.0
307.5
0.0
307.5
228.5
0.0
228.5
0.0
228.5
0.47
0.47
0.47
0.14
30.1
(3.2)
0.22
0.22
0.22
0.07
30.1
1.2
0.13
0.13
0.13
0.04
30.1
2.3
0.10
0.10
0.10
0.03
30.1
3.5
12/12
(11.6)
(31.3)
(40.6)
(39.3)
(39.2)
19.3
15.2
6.7
12/13E
(5.9)
(20.8)
(46.7)
(53.1)
(53.1)
15.4
12.8
3.8
12/14E
4.6
(11.0)
(33.3)
(41.5)
(41.5)
14.1
10.9
2.4
12/15E
8.3
(5.3)
(17.8)
(25.7)
(25.7)
13.5
9.5
1.8
12/12
1,121.4
1,899.0
48.9
(3,295.4)
(66.4)
(292.4)
12/13E
525.9
1,885.5
58.6
(651.1)
0.0
1,818.9
12/14E
307.5
1,854.3
61.3
(352.2)
0.0
1,871.0
12/15E
228.5
1,822.1
66.4
(130.7)
0.0
1,986.4
(480.6)
0.0
3.7
(434.4)
(911.3)
(1,669.6)
0.0
0.0
0.0
(1,669.6)
(1,572.3)
0.0
0.0
0.0
(1,572.3)
(1,532.8)
0.0
0.0
0.0
(1,532.8)
(472.2)
580.0
6.5
(5.0)
109.2
(1,094.5)
(337.6)
0.0
0.0
0.0
(337.6)
(188.4)
(158.3)
0.0
0.0
0.0
(158.3)
140.4
(92.6)
0.0
0.0
0.0
(92.6)
361.0
12/12
12/13E
12/14E
12/15E
1,811.0
2,743.3
819.5
0.0
5,373.9
13,739.6
849.4
11.0
887.8
20,861.8
1,622.7
2,858.9
967.1
0.0
5,448.7
13,574.8
798.3
11.0
887.8
20,720.6
1,763.0
3,290.5
1,028.3
0.0
6,081.9
13,343.8
747.2
11.0
887.8
21,071.8
2,124.0
3,838.4
1,214.5
0.0
7,176.9
13,105.6
696.1
11.0
887.8
21,877.5
6,674.0
1,345.0
19.2
8,038.2
1,086.0
52.9
1,138.9
9,177.1
6,286.0
1,345.0
19.2
7,650.2
1,086.0
52.9
1,138.9
8,789.2
6,426.6
1,345.0
19.2
7,790.8
1,086.0
52.9
1,138.9
8,929.8
7,030.0
1,345.0
19.2
8,394.2
1,086.0
52.9
1,138.9
9,533.2
Preferred shares
Total common equity
Minority interest
0.0
11,156.5
528.1
0.0
11,344.7
586.7
0.0
11,493.9
648.1
0.0
11,629.9
714.5
20,861.8
20,720.6
21,071.8
21,877.5
4.73
4.80
4.87
4.93
Ratios
CROCI (%)
ROE (%)
ROA (%)
ROACE (%)
Inventory days
Receivables days
Payable days
Net debt/equity (%)
12/12
14.0
10.4
5.5
10.8
14.5
48.7
138.0
5.3
24.8
12/13E
10.3
4.7
2.5
5.2
18.5
49.0
134.0
6.8
8.8
12/14E
8.6
2.7
1.5
3.5
19.4
51.4
123.6
5.5
5.7
12/15E
7.7
2.0
1.1
2.9
20.0
55.0
120.0
2.5
4.8
Valuation
12/12
12/13E
12/14E
12/15E
21.3
2.1
7.4
1.1
1.4
23.1
1.1
5.1
0.5
1.3
39.5
1.1
5.7
0.5
0.8
53.1
1.0
5.8
0.4
0.6
Cash & equivalents

Accounts receivable
Inventory
Net PP&E
Net intangibles
Total investments
Total assets
Accounts payable
Short-term debt
Long-term debt
Total liabilities
BVPS (Rmb)
P/E (analyst) (X)

P/B (X)
EV/EBITDA (X)
EV/GCI (X)
Dividend yield (%)
35
2013 7 8
8: Pingdingshan: Share price performance vs. peer group

Company
Ticker
Primary Analyst
Price
currency
Price as of
07/02/13
Price performance
since 12/04/12
3 month price
performance
6 month price
performance
12 month price
performance
Rmb
Rmb
HK$
Rp
Rmb
HK$
Rmb
HK$
Bt
Rmb
Rmb
HK$
Rmb
Rp
Rmb
HK$
HK$
HK$
HK$
HK$
Rmb
HK$
$
NT$
Rs
Rmb
W
Rmb
HK$
Rmb
W
HK$
Rmb
HK$
Rmb
Rmb
W
RM
Rmb
HK$
HK$
Rmb
W
$
Rp
Rp
Rp
Rp
Rp
Rmb
W
Rp
Rmb
Rmb
Rmb
Rmb
Rmb
Rmb
HK$
Bt
Bt
Rmb
Rmb
Rmb
HK$
$
Rmb
Rmb
HK$
Rmb
Rmb
HK$
7.56
4.57
3.25
1,230.00
3.35
4.93
15.71
25.00
398.00
4.66
5.47
6.44
10.23
570.00
6.74
7.73
3.18
9.78
4.71
5.13
21.69
31.40
18.03
26.25
368.90
8.04
13,350.00
13.10
1.96
12.26
81,300.00
36.40
19.92
19.42
8.63
8.75
441,000.00
10.26
1.90
2.09
3.92
8.35
319,500.00
74.23
1,350.00
2,650.00
40,000.00
22,500.00
14,300.00
7.92
25,850.00
17,050.00
36.47
15.38
16.96
15.85
11.23
7.38
2.89
390.00
390.00
16.21
12.23
16.02
11.82
4.83
12.22
13.06
13.04
14.64
3.58
3.08
2.3%
-1.9%
-1.2%
-3.9%
-2.0%
2.5%
-5.4%
-3.8%
2.8%
0.6%
-4.7%
-2.0%
-0.5%
1.8%
-0.7%
2.8%
-0.6%
-3.9%
-1.9%
-3.6%
0.6%
2.1%
0.0%
0.2%
1.4%
2.7%
3.1%
2.1%
2.6%
4.2%
3.6%
-15.5%
-1.8%
-1.6%
-14.6%
2.6%
1.6%
8.5%
1.1%
3.0%
4.5%
2.6%
0.3%
0.6%
0.7%
-25.4%
3.8%
-2.6%
2.5%
3.9%
2.0%
13.7%
4.2%
2.6%
2.7%
1.6%
5.8%
0.1%
0.0%
-7.1%
-7.1%
-2.2%
7.5%
3.2%
0.7%
-12.4%
1.4%
-0.5%
-1.5%
0.5%
1.4%
0.7%
-7.6%
-16.3%
5.9%
-1.6%
-6.4%
29.7%
18.2%
27.4%
-10.8%
6.9%
1.7%
35.6%
-14.2%
-14.9%
-1.2%
18.9%
9.7%
33.2%
35.0%
24.8%
1.2%
9.0%
3.9%
1.0%
2.6%
-12.6%
-17.3%
-5.6%
11.4%
-2.7%
-5.0%
-16.2%
-0.4%
13.6%
-30.2%
-6.6%
3.0%
3.6%
0.5%
34.8%
17.7%
-13.4%
-15.0%
-9.8%
-0.7%
-28.4%
6.5%
-3.2%
-2.1%
-29.2%
-26.2%
-6.1%
4.9%
-17.2%
-1.6%
-6.4%
-11.8%
-6.0%
39.6%
-19.4%
-19.4%
-5.8%
-13.8%
-8.5%
5.5%
-16.4%
-7.7%
-20.4%
25.6%
-0.7%
-4.3%
23.2%
-35.9%
-34.1%
-4.1%
-7.5%
-21.9%
6.7%
-11.4%
1.6%
-16.0%
-4.9%
-35.6%
2.2%
-40.6%
-66.1%
-27.1%
5.5%
2.9%
0.0%
-18.7%
-12.3%
-18.7%
8.7%
-4.0%
-5.7%
14.6%
-37.8%
-19.6%
-43.1%
-21.6%
-27.7%
-7.0%
-18.3%
-24.5%
14.4%
-37.6%
-31.2%
21.5%
7.5%
-24.0%
5.0%
-27.4%
-40.4%
-10.9%
-2.7%
-16.1%
-2.8%
16.4%
2.7%
-12.3%
-47.9%
-34.6%
6.9%
6.0%
-45.9%
-32.4%
-42.6%
-40.1%
-22.1%
8.6%
-10.1%
-10.1%
-28.1%
-37.8%
-31.2%
-11.5%
-15.1%
-24.0%
-34.8%
35.1%
-5.7%
-13.5%
21.7%
-41.8%
-42.9%
-12.2%
-23.6%
-33.3%
0.6%
-8.7%
0.4%
-27.4%
-7.0%
-44.1%
12.6%
-44.0%
-71.5%
-29.9%
-13.2%
-9.4%
5.4%
-20.2%
-7.4%
-17.1%
-5.6%
-4.6%
-8.6%
14.5%
-47.2%
-41.6%
-22.2%
-22.5%
-23.0%
-16.0%
NA
-23.1%
8.4%
-44.1%
-37.7%
27.5%
39.4%
-33.1%
-7.9%
-35.1%
-36.5%
-14.1%
-7.8%
-28.9%
6.0%
5.0%
24.0%
-14.9%
-39.1%
-54.6%
44.5%
-2.8%
-39.9%
-17.9%
-36.2%
-40.6%
-24.7%
-1.4%
18.5%
18.5%
-17.2%
-36.5%
-40.7%
-35.1%
-14.8%
-25.0%
-29.6%
-5.0%
0.5%
-19.4%
-7.5%
2,222
4.2%
-10.6%
-11.9%
-9.9%

601666.SS
601600.SS
2600.HK
ANTM.JK
Angang Steel (A)
000898.SZ
Angang Steel (H)
0347.HK
600585.SS
0914.HK
BANP.BK
600019.SS
601992.SS
2009.HK
601101.SS
Bumi Resources
BUMI.JK
601898.SS
1898.HK
3993.HK
3323.HK
1313.HK
0691.HK
601088.SS
1088.HK
China Steel (GDR)
2002q.L
2002.TW
Coal India Ltd.
COAL.BO
601001.SS
Dongkuk Steel Mill
001230.KS
600395.SS
002128.SZ
Hyundai Steel
004020.KS
3948.HK
Jiangxi Copper (A)
600362.SS
Jiangxi Copper (H)
0358.HK
000937.SZ
600997.SS
Korea Zinc
010130.KS
LMCE.KL
600808.SS
0323.HK
0975.HK
000780.SZ
POSCO
005490.KS
POSCO (ADR)
PKX
PT Adaro Energy Tbk
ADRO.JK
SMCB.JK
ITMG.JK
PTBA.JK
601918.SS
SeAH Besteel Corp.
001430.KS
SMGR.JK
600547.SS
600123.SS
SCCC.BK
SCCCn.BK
600348.SS
600188.SS
1171.HK
Yitai Coal
900948.SS
600497.SS
Yunnan Copper Co.
000878.SZ
1818.HK
Zhongjin Gold
600489.SS
Zijin Mining (A)
601899.SS
Zijin Mining(H)
2899.HK
Shanghai - Shenzhen 300
Yong Han, CFA

Julian Zhu
Julian Zhu
Nikhil Bhandari
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Nikhil Bhandari
Julian Zhu
Julian Zhu
Julian Zhu
Yong Han, CFA
Nikhil Bhandari
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Julian Zhu
Tommy Wong
Tommy Wong
Durga Dath
Yong Han, CFA
Seung Shin
Yong Han, CFA
Julian Zhu
Yong Han, CFA
Seung Shin
Yong Han, CFA
Julian Zhu
Julian Zhu
Yong Han, CFA
Yong Han, CFA
Seung Shin
Ishan Sethi
Julian Zhu
Julian Zhu
Julian Zhu
Yong Han, CFA
Seung Shin
Seung Shin
Nikhil Bhandari
Ishan Sethi
Nikhil Bhandari
Ishan Sethi
Nikhil Bhandari
Yong Han, CFA
Seung Shin
Ishan Sethi
Jefferson Zhang
Yong Han, CFA
Yong Han, CFA
Yong Han, CFA
Yong Han, CFA
Investment Research
Julian Zhu
Ishan Sethi
Ishan Sethi
Investment Research
Yong Han, CFA
Julian Zhu
Julian Zhu
Yong Han, CFA
Investment Research
Investment Research
Julian Zhu
Jefferson Zhang
Julian Zhu
Julian Zhu
36
2013 7 8
, CFA
EBITDA CROCI
EV/FCFEV/EBITDAEV/DACF 12
Quantum
Quantum
GS SUSTAIN
GS SUSTAIN GS SUSTAIN
, CFA
ACC(A)(H)Ambuja Cements(A)(H)(A)(H)Asia CementAsia Cement China
Holdings(A)(H)Banpu Public CompanyBumi Resources(H)
(A)(H)China Steel (GDR)China Steel CorporationCoal India Ltd.Grasim IndustriesHarum Energy Tbk PTIndia
Cements(A)(H)Korea Zinc(A)(H)Mongolian Mining Corp.PT Adaro Energy TbkPT Indo Tambangraya MegahPT
Tambang Batubara Bukit AsamShree Cement LtdTCC International HoldingsTaiwan CementUltratech
Cement(A)(H)(A)(H)
(H)
B
3 (Rmb8.32) (Rmb8.10) (Rmb7.55)

(Rmb7.44)
12 (Rmb8.10) (Rmb7.44)
(Rmb7.53) (Rmb5.90) (Rmb8.69) (H) (HK$35.50) (Rmb5.49)
(Rmb5.00) (Rmb4.93) (Rmb11.67) (Rmb10.87) (Rmb10.81) (Rmb8.16) B ($4.68)
25-35%10-15%
(A) 12
(N) 12 (C) 12
(NR)
(RS)
() (CS)
(NC) (NA) (NM)
37
2013 7 8
()
http://www.theocc.com/about/publications/character-risks.jsp
2013
(i)(ii)
38

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2013 7 8

We adjust our 2013-15 coal price and earnings estimates

Adopting EV/EBITDA framework; Buy Lanhua/Luan/SDIC; Pingdingshan/Jizhong/Yitai to Neutral; Kailuan to Sell

Kailuan (600997.SS): Down to Sell on downward price pressure

Yitai B/H (900948.SS/3948.HK): Down to Neutral on outperformance

Jizhong (000937.SZ): Acquisition progress unlikely; down to Neutral

Pingdingshan (601666.SS): Pessimism looks priced in; up to Neutral

China Coal (A)

Yitai Coal (B)

Median-A/B share coal companies

Yitai Coal (H)

China Coal (H)

Mongolian Mining Corp

Median-H share coal companies

Alpha Natural Resources

Median-US coal companies

Tambang Batubara Bukit Asam

*Indicates the stock is on our regional Conviction List.

Multiple factors driving coal market weakness; financial tightening

Exhibit 2: China PMI index

Hydro power generation ytd yoy

Thermal power generation ytd yoy

Exhibit 6: Thermal and hydro power installed capacity

Exhibit 5: Installed capacity by energy type

Thermal power new capacity ytd yoy

Source: China Electricity Council.

Source: China Electricity Council.

Exhibit 7: Coal inventories at major power producers

Exhibit 9: Coal import volume is rapidly increasing

Exhibit 10: The difference between domestic and foreign

Coal prices continue to face downward pressure

Exhibit 11: About 25% of coal firms are operating at a

Companies with profits

China quarterly IP growth

Exhibit 14: IP is also under downward pressure (yoy)

Source: Goldman Sachs Research estimates.

Source: Goldman Sachs Research estimates.

AUD/USD exchange rate

Source: Goldman Sachs Research estimates.

Path to coal industry stabilization must include lower coal prices,

New start this year

Source: 2005-2012 China Statistical Yearbook, Gao Hua Securities Research.

Chinas increased focus on environmental issues should limit coal consumption.

Exhibit 17: Energy development in the 11th Five-Year

Energy development plan for 12th Five-year

Energy consumption pattern in 11th Five-year

Exhibit 18: Key energy development targets for the 12th

Improvement of Per capita household

Note: {} indicates data of 5-year accumulated

Source: Energy Development Plan for the 12th Five-Year Plan.

Exhibit 19: Energy consumption structure in China

Exhibit 20: Coal consumption can hardly resume high

Coal consumption elasticity

Source: Wind, Gao Hua Securities Research estimates.

Judging by US industry development experience, changes in energy structure are a

Exhibit 21: US energy consumption structure for the last

Exhibit 22: Changes in US power generation fuel

QHD 5500kcal/kg coal price

Exhibit 24: Liulin coking coal prices dropped sharply

Liulin #4 coking coal price

Exhibit 25: Coal production fell sharply

Exhibit 26: as did coal consumption

Coal sector total profits

China coal sector liability/asset ratio