Good Performance Leads to 'Buy' Rating

Soaring coking coal prices, estimated to have increased by 70% since the beginning of 2008, have made a major contribution to the company’s strong performance. In addition, certain facilities with an annual coal washing capacity of 15 mln tons that will be put into operation in 2010 will more than double the company's total output. Kewa railway, which is to be operational in August 2008, will reduce transportation costs by an additional RMB 50 to 80 per ton.

The company generates power with coal refuse and middlings, thus alleviating cost pressures on the power plant. It is estimated that the company's EPS for 2008 and 2009 will be RMB 2.14 and RMB 2.66 respectively, with corresponding dynamic P/E ratios of 19.4 and 15.6. We have therefore assigned a 'Buy' rating to the company's stock.


Source: www.htsc.com.cn

Date: 1 Aug 2008

CN01/SS/SW/BT/MM