Guoyuan International: Gives SHOUGANG RES (00639) a "buy" rating with a target price of HKD 3.18.

Guoyuan International released a research report stating that SHOUGANG RES (00639) has sufficient cash reserves and continues to adhere to a high dividend policy in the long term (97% in 2025). The bank updated the company's target price to HK$3.18 per share, corresponding to 16.5 times and 15 times PE in 2026 and 2027 respectively. The target price has a growth potential of 22% compared to the current price, and a "buy" rating is given. Key points from Guoyuan International: - Coal cost per ton in 2025 decreased by 13% year-on-year, with significant improvement in fine control. - Cost-effective production cost of raw coking coal in 2025 was 373 yuan/ton, a decrease of 13% year-on-year. Controllable cash production costs (excluding resource taxes and depreciation) were 229 yuan/ton, a decrease of 9% year-on-year. The main reasons for cost reduction include: (i) a 6% increase in raw coal production bringing economies of scale; (ii) a decrease in coal prices resulting in a significant reduction in resource taxes and other from-value taxes by about 30 yuan/ton; (iii) effective control measures for material consumption; and (iv) reduction in benefits wages with declining profits leading to a corresponding decrease in miscellaneous expenses, maintaining the expense ratio at around 6%. The company aims to further reduce costs by 3.5% to 10% in 2026, with measures including increasing layoff efforts, transparent material tendering, and improving yield rates. - Coking coal is expected to see marginal improvement in supply and demand in 2026, with recent price increases in coking coal providing support for coking coal prices. - The company's three mines have achieved stable production in 2026 Q1 and operating data is positive. Risk warning: 1. Economic downturn, domestic demand for coking coal lower than expected; 2. Risks from safety supervision and production restriction policies leading to a decrease in production; 3. Significant decrease in international coking coal prices; 4. Approval for the Lianshan Coal Guojiaogou Coal Mine falls below expectations; 5. Dividend payout lower than expected.