Morgan Stanley: China Shenhua Energy (01088) is given a "buy" rating with a target price of HKD 38.

Morgan Stanley released a research report stating that the updated dividend guidance and asset injection of China Shenhua Energy (01088) are slightly positive, with a target price of HK$38 and a rating of "hold". The company announced that the dividend payout ratio for 2025 to 2027 will not be less than 65%, higher than the 60% for 2022 to 2024. As the dividend payout ratio for the group in 2022 to 2023 is 70%, Morgan Stanley believes the new guidance shows that there is moderate room for the dividend to increase. The bank stated that Shenhua has acquired 100% equity of Hangjin Energy from its parent company for 8.526 billion RMB. Against the backdrop of falling coal prices and a lack of internal growth, the bank believes that acquiring assets from the parent company provides a growth path for Shenhua without worsening the oversupplied coal market. However, the bank pointed out that Shenhua has 62 billion RMB in net cash, so the impact of the transaction on its dividend is limited.