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On Tuesday, Goldman Sachs made an adjustment to China Shenhua Energy’s stock rating, upgrading it from Sell to Neutral. The firm also slightly lowered the price target for the company’s A-shares to RMB32.50 from RMB33.00. This revision follows a period of underperformance in the company’s share price since the beginning of the year.
Trina Chen of Goldman Sachs projected a decrease in unit EBIT profit for coal and power in the coming year, from RMB256 per ton to RMB215 per ton, and from RMB0.031 per kWh to RMB0.024 per kWh, respectively. Despite these anticipated contractions, the analyst expects China Shenhua Energy to maintain strong operating cash flow and a robust balance sheet, which should support a consistent dividend payout ratio of 70%. This dividend payout is projected to yield between 5.8% and 7.2% for the company’s A and H shares.
The price target for Shenhua’s H-shares listed in Hong Kong was also revised, with a decrease from HK$30.0 to HK$29.5. This new target corresponds to a price-to-earnings (PE) ratio of 9.1 times based on the company’s expected earnings for 2025.
Since January 8, 2025, when Goldman Sachs added Shenhua-A to its Sell list, the analyst noted that the share price has fallen by 9%, in contrast to the CSI300 index, which has risen by 4%. The current valuation of Shenhua-A is now considered close to fair value, trading at a PE ratio of 12 times for the 2025 estimates, which aligns with its historical average levels ranging from 8.0x to 15.0x.
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