Coal mining enterprises are bullish about their business operations on high coal demand, after positive results in the first quarter of 2022 with many exceeding targets.

Data compiled by Vinacomin - Minerals Holding Corporation (UPCoM: KSV) showed that in the last quarter, raw coal output was 10.58 million tonnes, reaching 27.1 percent of the year plan and equaling 106 percent of last year's production. Meanwhile, its coal consumption reached 11.07 million tonnes, equal to 25.7 percent of the annual plan and up 12.4 percent year-on-year. 

During the economic recovery post-COVID-19 pandemic, domestic demand for coal is at a high level, especially coal for power generation. Coal-fired power is accounting for more than 30 percent of the country's total power capacity and plays an important role in ensuring national energy security. It is also one of the main sources of power supply to meet the needs of economic development and maintain the stable operation of the system.

Rising coal prices

Moreover, domestic coal prices are expected to soon be adjusted, increasing profit margins for businesses. According to Viet Capital Securities Company (VCSC), the domestic coal price is currently at a modest level compared to the international coal price. At present, international prices were 2.5-3 times higher than domestic prices and may continue to increase.

Rystad Energy, an independent energy research agency, said that if sanctions on coal with Russia eventuate or there is a physical disruption to Russian rail/port transportation, then there will not be a cap on coal prices. 

Adding to the supply concerns, Australia recently declared a national emergency in response to devastating floods along the East coast, affecting coal-producing regions of this country. Rystad Energy predicts coal prices may surpass 500 USD per tonne this year.

Meanwhile, experts of VCSC forecast that TKV may ask to raise coal prices in 2022, as domestic coal prices have remained stable over the past two years despite rising production costs. 

With the domestic coal production capacity of 100 percent, coal production is expected to reach 41 million tonnes this year, up 2 percent on-year. Therefore TKV has to import coal from other markets. And as international coal prices have continuously inched higher, it is not economical for TKV to maintain the coal prices since 2021. 

Sacombank Securities Joint Stock Company (SBS) said that listed coal mining companies can also benefit from negotiating new selling prices for TKV this year. 

To produce coal for power generation and benefit from the cost, businesses are concentrating their resources, preventing production disruptions. They also have to mobilise the workforce and equipment to organise coal mining, increase coal production, process and mix coal, ensuring coal output for consumption demand.

Bullish business results

Thanks to that, a number of coal mining companies reported outstanding production and business results in the first quarter of 2022. For Nui Beo Coal JSC (HNX: NBC), under Vinacomin, coal consumption reached 545,000 tonnes, exceeding 30 percent of the quarterly plan, while its revenue was 826 billion VND, exceeding 34 percent of the quarter plan.

Ha Tu Coal JSC (HNX: THT), another company under Vinacomin, produced 370,000 tonnes of raw coal, reaching over 29 percent of the year plan, while coal consumption was approximately 70,000 tonnes, reaching over 25 percent of the year plan. The coal miner posted revenue of 1 trillion VND, equal to 26.3 percent of the five-year plan, with profit of over 10 billion VND, reaching 33 percent of the year plan.

Mong Duong Coal JSC (HNX: MDC), under Vinacomin, said that its coal production in the first quarter reached 325,000 tonnes, 21.3 percent of the year plan. It consumed 340,000 tonnes, reaching 22.3 percent of the year plan.

On the stock market, coal stocks extended recent rallies with MDC up 4.84 percent to 13,000 VND per share at 2.45pm (local time), while THT rose 5.07 percent to 14,500 VND a share, NBC climbed by 6 percent to 15,900 VND per share. 

Le Xuan, a senior trader, said that coal stocks witnessed extraordinary performance in the last four to five sessions as they traded contrary to the market's downside trend. 

"It is thanks to higher domestic coal demand post-COVID-19, rising inflation, the conflict between Russia and Ukraine, and news about China reducing coal import tariffs to zero starting from May," Xuan added. 

"However, I think investors need to pay attention to liquidity when trading these stocks, since coal stocks' trading volume is quite low.

"Moreover, the industry has fewer rally waves than others, so investors need to be patient. 

"The industry's business results are not so impressive with low price to book (P/B) ratio and price to earning (P/E) ration due to low earning per share (EPS) ratio."/.