Investment Rating - The report maintains a "Buy" rating for Shougang Resources, with a target price of HKD 3.19, indicating an expected performance that exceeds the local market index by over 15% [7][8]. Core Views - The significant increase in the sales proportion of high-sulfur coking coal has impacted sales prices, but the pressure is expected to ease in the first half of 2025. The company is projected to maintain a 100% dividend payout ratio for 2024, supported by strong cash flow [2][8]. - The company experienced a decline in total revenue for 2024, amounting to HKD 5.057 billion, a decrease of 14% year-on-year, while net profit fell by 21% to HKD 1.494 billion. This decline is attributed to changes in sales structure, falling coking coal prices, and currency exchange rate impacts [8]. Financial Summary - Revenue and Profit Trends: - Revenue for 2021 was HKD 7,075.82 million, increasing to HKD 8,214.72 million in 2022, before dropping to HKD 5,891.07 million in 2023 and further to HKD 5,057 million in 2024, reflecting a 14.2% decrease [6]. - Net profit followed a similar trend, with HKD 2,538.50 million in 2021, HKD 2,715.37 million in 2022, HKD 1,889.25 million in 2023, and HKD 1,494.07 million in 2024, marking a 20.9% decline [6]. - Production and Sales: - The company anticipates a raw coking coal production of approximately 4.96 million tons in 2024, a decrease of 6%, while the production of premium coking coal is expected to be around 3.16 million tons, down 3% [8]. - The average selling price of premium coking coal is projected to be HKD 1,666 per ton in 2024, a decline of 14% year-on-year [8]. - Dividend and Cash Flow: - The company expects to distribute profits amounting to HKD 1.512 billion in cash for 2024, with a dividend payout ratio of 100%, an increase from 73% in 2023 [8].

Investment Rating - The investment rating for the company is maintained as "Buy" with a target price of HKD 3.40 [6][7]. Core Views - The company reported a revenue of HKD 5.06 billion for 2024, a decrease of 14.2% year-on-year, primarily due to a decline in average selling prices and increased production costs [1][2]. - Despite the revenue decline, the company declared a total dividend of HKD 0.30 per share, an increase of 7.1% year-on-year, with a dividend payout ratio reaching 100% [1][3]. - The company has a strong asset base and stable operations, which supports its high dividend yield of 11.5% [1][3]. Summary by Sections Revenue and Profitability - The company achieved a net profit of HKD 1.49 billion in 2024, down 20.9% year-on-year, with a gross profit margin of 51.2% [5][12]. - The average selling price of premium coking coal fell by 13.8% to HKD 1,666 per ton, which was more significant than the market average decline [2][3]. Production and Costs - The company produced 4.96 million tons of raw coking coal in 2024, a decrease of 5.5% year-on-year, while premium coking coal production was 3.16 million tons, down 2.8% year-on-year [2][3]. - Production costs for raw coal increased by 7% to HKD 429 per ton, influenced by various cost factors including resource taxes and labor [3][20]. Financial Forecasts - The forecast for net profit for 2025 is adjusted to HKD 1.05 billion, reflecting a 39% decrease from previous estimates [4][11]. - The company is expected to maintain a dividend payout ratio of 80% from 2025 to 2035, with a perpetual growth rate assumption of 0% [4][13]. Valuation Metrics - The company’s price-to-earnings (P/E) ratio is projected to be 12.37 for 2025, while the price-to-book (P/B) ratio is expected to be 0.75 [5][20]. - The target price of HKD 3.40 represents a 6.3% increase from the previous target price of HKD 3.20 [11][20].

Investment Rating - The investment rating for the company is maintained as "Buy" with a target price of HKD 3.40 [7][8]. Core Views - The company reported a revenue of HKD 5.06 billion for 2024, a decrease of 14.2% year-on-year, primarily due to a decline in average selling prices and increased production costs [1][2]. - Despite the revenue decline, the company declared a total dividend of HKD 0.30 per share, an increase of 7.1% year-on-year, with a dividend payout ratio reaching 100% [1][2]. - The company has a strong asset base and stable operations, which supports its high dividend yield of 11.5% [1]. Revenue and Profitability - The company achieved a net profit of HKD 1.49 billion in 2024, down 20.9% year-on-year, with a gross profit margin of 51.2% [5][13]. - The average selling price of premium coking coal decreased by 13.8% year-on-year, which was more significant than the market average decline [2][3]. Production and Cost Management - The company produced 4.96 million tons of raw coking coal in 2024, a decrease of 5.5% year-on-year, but production is expected to recover in the second half of 2024 [2][3]. - The production cost of raw coal increased by 7% year-on-year to HKD 429 per ton, influenced by various cost factors including resource taxes and labor [3][4]. Financial Forecast and Valuation - The forecasted net profit for 2025 is adjusted to HKD 1.05 billion, reflecting a 39% decrease from previous estimates [4][12]. - The valuation method has been adjusted to a Dividend Discount Model (DDM), with a conservative assumption of an 80% dividend payout ratio and a target price of HKD 3.40 [4][12]. Key Financial Metrics - The company's earnings per share (EPS) for 2024 is projected at HKD 0.30, with a price-to-earnings (PE) ratio of 8.67 [5][21]. - The return on equity (ROE) is expected to decline to 9.12% in 2024, down from 11.43% in 2023 [5][21].

Group 1 - The company reported a revenue of HKD 5.057 billion for the year ending December 31, 2024, a decrease of 14% year-on-year [1] - The profit attributable to shareholders was HKD 1.494 billion, down 21% year-on-year, with basic earnings per share at HKD 0.3012 [1] - The proposed final dividend is HKD 0.21 per ordinary share [1] Group 2 - The decline in revenue was primarily due to a 14% year-on-year decrease in the average selling price of premium coking coal, which was partially offset by a slight increase of approximately 1% in sales volume [1] - The company's raw coking coal production was approximately 4.96 million tons, a 6% decrease from the previous year, while premium coking coal production was about 3.16 million tons, down 3% year-on-year [1] - The sales of premium coking coal accounted for 100% of the company's revenue, aligning with its long-term strategy focused on premium coking coal sales [1] Group 3 - The company has taken proactive measures to address the impact of coal price fluctuations and quality changes [2] - The sales volume of low-sulfur premium coking coal significantly dropped by 95% year-on-year, with low-sulfur and medium-high sulfur premium coking coal sales accounting for 1% and 99% of total premium coking coal sales, respectively [2] - The average realized price of premium coking coal (including VAT) decreased by 14% to RMB 1,666 per ton, down from RMB 1,932 per ton in the previous year [2]

Financial Performance - For the year ended December 31, 2024, total revenue decreased by 14% to HKD 5,057 million from HKD 5,891 million in 2023[2] - Gross profit fell by 25% to HKD 2,588 million, resulting in a gross margin of 51%, down from 59%[2] - Net profit attributable to owners decreased by 21% to HKD 1,494 million compared to HKD 1,889 million in the previous year[2] - EBITDA declined by 21% to HKD 3,089 million from HKD 3,924 million in 2023[2] - The company reported a decrease in total comprehensive income to HKD 1,398 million from HKD 1,884 million in 2023, a decline of 26%[5] - The total revenue from customer contracts for the year ended December 31, 2024, was HKD 5,057,000, a decrease from HKD 5,891,068 in 2023, representing a decline of approximately 14.1%[15] - The company reported a net profit attributable to shareholders of HKD 1,494,066,000 for 2024, down from HKD 1,889,247,000 in 2023, indicating a decrease of about 20.9%[23] - The basic and diluted earnings per share for 2024 were HKD 0.301, compared to HKD 0.375 in 2023, reflecting a decline of approximately 19.7%[23] - The company’s top five customers accounted for approximately 62% of total operating revenue, with the largest customer contributing about 40%[39] Dividends and Payouts - The company proposed a final dividend of HKD 0.21 per share, up from HKD 0.18 in 2023, resulting in a total payout ratio of approximately 100% for the year[2] - The company declared a final dividend of HKD 0.18 per share for 2023, totaling HKD 886,831,000, down from HKD 0.28 per share in 2022, which amounted to HKD 1,414,515,000[22] - The total dividend proposed for the year ended December 31, 2024, is HKD 30 per share, an increase from HKD 28 per share in 2023[31] Assets and Liabilities - Total assets increased to HKD 22,948 million, up from HKD 22,492 million in 2023, reflecting a growth of 2%[6] - Current ratio improved to 4.25 from 3.97 in the previous year, indicating better short-term financial health[2] - Cash and cash equivalents rose to HKD 7,676 million, compared to HKD 6,552 million in 2023, showing an increase of 17%[6] - The net asset value attributable to owners per share decreased by 2% to HKD 3.24 from HKD 3.30 in the previous year[2] - The group's accounts payable decreased to HKD 282.26 million in 2024 from HKD 303.10 million in 2023[28] - The group's impairment loss on trade receivables decreased to HKD 182.86 million in 2024 from HKD 184.43 million in 2023[28] - The group’s total accounts receivable and notes receivable were recorded at HKD 757.52 million in 2024, compared to HKD 621.47 million in 2023[28] Production and Sales - The group's raw coking coal production decreased by 6% to approximately 4.96 million tons in 2024, down from 5.25 million tons in 2023[34] - The group's refined coking coal production fell by 3% to about 3.16 million tons in 2024, compared to 3.25 million tons in 2023[35] - The sales volume of refined coking coal increased by 1% to 3.13 million tons in 2024, up from 3.10 million tons in 2023[34] - The average selling price of refined coking coal decreased by 14% to RMB 1,666 per ton in 2024, down from RMB 1,932 per ton in 2023[34] - The cost of sales increased by approximately HKD 44 million or 2% year-on-year to HKD 2.469 billion, primarily due to a 1% increase in coking coal sales volume[42] Operational Changes and Strategy - The company reported no significant operational changes during the year, maintaining its focus on coking coal mining and production[8] - The company has not adopted any new accounting standards that would significantly impact its financial performance for the current or future periods[11] - The company plans to assess the impact of newly issued accounting standards on its financial performance and position, although it has not yet determined if these will have a significant effect[13] - The group did not engage in any significant investments or acquisitions during the fiscal year ending December 31, 2024[56] - The company completed the construction acceptance of its coal mine project in 2024 and obtained a safety production license[72] - The company aims to enhance production management and safety capabilities through digital management and automation[72] Governance and Management - The company has complied with the corporate governance code as per the listing rules during the fiscal year ending December 31, 2024[75] - The board of directors is composed of key executives including the chairman and several independent directors[80] - The presence of both executive and independent directors suggests a focus on governance and oversight in decision-making[80] - The board's composition reflects a diverse range of expertise, which may enhance strategic decision-making processes[80] Market and Economic Conditions - The company’s external customer revenue from China represents the majority of its total revenue, highlighting its reliance on this market[16] - The total revenue from external customers in Hong Kong remained at zero for 2024, compared to HKD 4,061 in 2023, indicating a complete withdrawal from this market[16] - The group experienced a foreign exchange loss of approximately HKD 168 million due to the depreciation of the RMB against the HKD[62] - The average trading volume increased by 11% for the year ending December 31, 2024, improving liquidity in stock trading[67] - The current ratio as of December 31, 2024, was 7% higher compared to December 31, 2023, and free cash resources increased by 15% year-on-year[67]

Core Viewpoints - The coal sector has experienced a high-level retreat in the first two months of 2025, underperforming the market by 11.8 percentage points, ranking last among all industry indices [4][14]. - The coal price is expected to stabilize and gradually recover due to improved industrial demand, slowing production growth, and reduced import expectations [4][29]. Group 1: Coal Sector Review - In the first two months of 2025, the coal sector has declined by 10.0%, ranking 30th out of 30 in the industry indices [4][14]. - The sub-sectors of thermal coal, coking coal, and coke have seen respective declines of 15.5%, 11.4%, and 7.4% in the first two months [14]. - As of March 18, 2025, the coal sector's price-to-earnings (PE) ratio is at 10.4 times, which is at a historical average level, while the price-to-book (PB) ratio is at 1.33 times, also at a historical average [19][23]. Group 2: Coal Market Review - The growth rate of electricity consumption has dropped to 1.3% in the first two months, while non-electric demand has shown overall improvement [4][29]. - Domestic coal prices have been weak since the beginning of the year, with thermal coal prices stabilizing in March [29]. - The import growth rate of coal has decreased to 1.8% in the first two months of 2025 [4][29]. Group 3: Recent Market Dynamics - Port thermal coal prices have slightly declined, while prices in production areas have generally rebounded [4][29]. - The price of thermal coal is expected to stabilize in the short term due to inventory reductions at southern ports and coastal power plants [4][29]. - Coking coal prices have continued to decline, but demand is expected to improve as the spring construction season approaches [4][29]. Group 4: Industry Outlook - The coal price is expected to find support at the bottom, with the sector's valuation and dividend advantages becoming more pronounced [4][29]. - The anticipated average coal price for 2025 may decline, but leading companies are expected to maintain stable profitability due to effective cost control [4][29]. - Key companies with robust dividends include Shaanxi Coal and China Shenhua, while companies with lower valuations and long-term growth potential include Xinji Energy and Yanzhou Coal [4][29].

Investment Rating - The report indicates a positive sentiment towards the company, highlighting the successful oversubscription of the rights issue, which reflects shareholder confidence in the company's business development [1]. Core Viewpoints - The rights issue was well-received, with a subscription rate of approximately 4.44 times the available shares, indicating strong interest from existing shareholders [1]. - The total amount raised from the rights issue is expected to be around HKD 427 million, with a net amount of approximately HKD 425 million after expenses [1]. - Following the rights issue, the major shareholder's stake increased from 17.52% to 18.07%, while another shareholder's stake slightly decreased, indicating a shift in the ownership structure [1]. - The report suggests that the company has sufficient cash reserves to support its coking coal business and ensure stable high dividends for shareholders, presenting long-term investment value [1]. Summary by Sections Rights Issue Details - The rights issue was based on a ratio of one new share for every thirty existing shares held, priced at HKD 2.60 per share [1]. - A total of 164,227,928 new shares were offered, with 52 valid acceptances and applications received by the deadline [1]. Shareholder Confidence - The oversubscription of the rights issue demonstrates existing shareholders' confidence in the company's future performance and its coking coal business [1]. - The report notes that while there may be some dilution of earnings per share (EPS) due to the new shares, the rights issue was structured to consider existing shareholders' interests [1]. Future Outlook - The company is expected to see a recovery in coal production and sales in 2025, supported by ample cash reserves for future operations [1]. - The report emphasizes the potential for improved profitability and sustained returns for shareholders in the long run [1].

[FINANCIAL HIGHLIGHTS](index=5&type=section&id=FINANCIAL%20HIGHLIGHTS) [H1 2024 Performance Overview](index=5&type=section&id=H1%202024%20Performance%20Overview) H1 2024 saw significant year-on-year declines in key financial metrics, including a 27% revenue drop to HKD 2.5 billion and a 32% decrease in profit attributable to owners to HKD 840 million, with a reduced interim dividend Financial Highlights | Metric | H1 2024 | H1 2023 | Y-o-Y Change | | :--- | :--- | :--- | :--- | | **Revenue (HKD '000)** | 2,497,844 | 3,442,305 | -27% | | **Gross Profit (HKD '000)** | 1,406,230 | 2,232,651 | -37% | | **Gross Profit Margin** | 56% | 65% | -9pp | | **Profit for the Period (HKD '000)** | 982,542 | 1,519,093 | -35% | | **Profit Attributable to Owners (HKD '000)** | 837,351 | 1,232,644 | -32% | | **EBITDA (HKD '000)** | 1,666,070 | 2,372,560 | -30% | | **Basic Earnings Per Share (HK cents)** | 17.00 | 24.40 | -30% | | **Interim Dividend Per Share (HK cents)** | 9.00 | 10.00 | -10% | Financial Position Highlights | Metric | As of June 30, 2024 | As of Dec 31, 2023 | Change | | :--- | :--- | :--- | :--- | | **Total Assets (HKD '000)** | 23,140,351 | 22,491,544 | +3% | | **Cash and Deposits (HKD '000)** | 9,220,290 | 7,944,731 | +16% | | **Total Liabilities (HKD '000)** | 4,698,733 | 4,021,026 | +17% | | **Total Equity (HKD '000)** | 18,441,618 | 18,470,518 | - | | **Current Ratio (times)** | 3.44 | 3.97 | -13% | | **Gearing Ratio** | – | – | – | [Condensed Consolidated Financial Statements](index=8&type=section&id=Condensed%20Consolidated%20Financial%20Statements) [CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENT%20OF%20PROFIT%20OR%20LOSS%20AND%20OTHER%20COMPREHENSIVE%20INCOME) In H1 2024, revenue decreased 27% to HKD 2.5 billion, gross profit fell 37% to HKD 1.41 billion, and profit attributable to owners declined 32% to HKD 840 million Income Statement | Item (HKD '000) | H1 2024 (Unaudited) | H1 2023 (Unaudited) | | :--- | :--- | :--- | | **Revenue** | 2,497,844 | 3,442,305 | | **Cost of Sales** | (1,091,614) | (1,209,654) | | **Gross Profit** | 1,406,230 | 2,232,651 | | **Profit Before Income Tax** | 1,393,872 | 2,121,154 | | **Income Tax Expense** | (411,330) | (602,061) | | **Profit for the Period** | 982,542 | 1,519,093 | | **Profit Attributable to Owners of the Company** | 837,351 | 1,232,644 | | **Profit Attributable to Non-controlling Interests** | 145,191 | 286,449 | [CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION](index=10&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENT%20OF%20FINANCIAL%20POSITION) As of June 30, 2024, total assets increased 3% to HKD 23.14 billion, total liabilities rose 17% to HKD 4.7 billion, and cash and deposits reached HKD 9.22 billion, maintaining a robust financial position with a 3.44x current ratio and zero gearing Assets | Assets (HKD '000) | As of June 30, 2024 (Unaudited) | As of Dec 31, 2023 (Audited) | | :--- | :--- | :--- | | **Total Non-current Assets** | 12,161,507 | 12,467,529 | | **Total Current Assets** | 10,978,844 | 10,024,015 | | Of which: Cash and Cash Equivalents | 6,758,308 | 6,552,242 | | Of which: Time Deposits | 2,461,982 | 1,392,489 | | **Total Assets** | 23,140,351 | 22,491,544 | Liabilities and Equity | Liabilities and Equity (HKD '000) | As of June 30, 2024 (Unaudited) | As of Dec 31, 2023 (Audited) | | :--- | :--- | :--- | | **Total Current Liabilities** | 3,188,759 | 2,522,589 | | Of which: Dividends Payable | 886,831 | – | | **Total Non-current Liabilities** | 1,509,974 | 1,498,437 | | **Total Liabilities** | 4,698,733 | 4,021,026 | | **Total Equity** | 18,441,618 | 18,470,518 | | **Equity Attributable to Owners** | 16,109,542 | 16,281,846 | [CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS](index=14&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENT%20OF%20CASH%20FLOWS) In H1 2024, net cash inflow from operating activities significantly decreased to HKD 1.18 billion, primarily due to lower profit before tax, while net cash outflow from investing activities was HKD 900 million, and cash and cash equivalents increased to HKD 6.76 billion at period-end Cash Flow Statement | Item (HKD '000) | H1 2024 (Unaudited) | H1 2023 (Unaudited) | | :--- | :--- | :--- | | **Net Cash Inflow from Operating Activities** | 1,180,302 | 2,720,518 | | **Net Cash Outflow from Investing Activities** | (900,997) | (1,329,616) | | **Net Cash Outflow from Financing Activities** | (64,735) | (125,061) | | **Net Increase in Cash and Cash Equivalents** | 214,570 | 1,265,841 | | **Cash and Cash Equivalents at End of Period** | 6,758,308 | 5,027,222 | [MANAGEMENT DISCUSSION AND ANALYSIS](index=53&type=section&id=MANAGEMENT%20DISCUSSION%20AND%20ANALYSIS) [Business Review](index=53&type=section&id=Business%20Review) In H1 2024, raw coking coal and clean coking coal production decreased by 15% and 31% respectively due to temporary suspension at Xingwu Coal Mine, with clean coking coal sales down 25%, while average selling price only slightly decreased by 2% to RMB 1,938 per tonne Operational Data | Operational Data | Unit | H1 2024 | H1 2023 | Y-o-Y Change | | :--- | :--- | :--- | :--- | :--- | | **Raw Coking Coal Production** | Million tonnes | 2.25 | 2.66 | -15% | | **Clean Coking Coal Production** | Million tonnes | 1.29 | 1.86 | -31% | | **Clean Coking Coal Sales** | Million tonnes | 1.34 | 1.79 | -25% | | **Clean Coking Coal Average Selling Price (incl. tax)** | RMB per tonne | 1,938 | 1,973 | -2% | - The primary reason for the production decline was the **temporary suspension** at Xingwu Coal Mine in H1 2024 due to production layer replacement, with normal operations resuming in **mid-July**[164](index=164&type=chunk) [Financial Review](index=56&type=section&id=Financial%20Review) The financial review details the performance decline, with revenue down 27% due to lower sales and prices, gross profit margin compressing from 65% to 56% due to increased unit production costs, and net profit decreasing 35%, while maintaining a robust financial position with no borrowings and ample cash reserves [Revenue and Customers](index=56&type=section&id=Revenue%20and%20Customers) H1 2024 revenue decreased 27% to HKD 2.5 billion, primarily due to a 25% drop in clean coking coal sales and a 2% decline in average selling price, with the top five customers accounting for 73% of revenue, and Shougang Group's share increasing to 51% - Revenue decreased by **27%** year-on-year to **HKD 2.498 billion**, primarily due to a **25%** decline in clean coking coal sales volume and a **2%** decrease in average selling price[168](index=168&type=chunk) - The top five customers accounted for **73%** of total revenue, with the largest customer, Shougang Group and its subsidiaries, contributing **51%** of revenue and **48%** of sales volume[168](index=168&type=chunk) [Cost and Gross Profit](index=58&type=section&id=Cost%20and%20Gross%20Profit) Cost of sales decreased 10% to HKD 1.09 billion, but raw coking coal unit production cost rose 13% to RMB 453 per tonne due to lower output, leading to a 37% decline in gross profit to HKD 1.41 billion and a gross profit margin compression from 65% to 56% Unit Production Cost | Unit Production Cost (RMB per tonne) | H1 2024 | H1 2023 | Change | | :--- | :--- | :--- | :--- | | **Raw Coking Coal Production Cost** | 453 | 400 | +13% | | Less: Depreciation and Amortization | (96) | (74) | +30% | | **Cash Raw Coking Coal Production Cost** | 357 | 326 | +10% | | **Clean Coking Coal Processing Fee** | 50 | 40 | +25% | - Gross profit margin decreased from **65%** in the prior period to **56%**, primarily due to lower average realized selling prices and reduced recovery rates[172](index=172&type=chunk)[186](index=186&type=chunk) - Raw coking coal unit production cost increased by **13%** year-on-year, mainly due to a **15%** decrease in raw coking coal production volume[183](index=183&type=chunk) [Expenses and Profitability](index=61&type=section&id=Expenses%20and%20Profitability) Sales and distribution expenses significantly decreased by 56% year-on-year due to lower sales volume and cost control, while profit attributable to owners was HKD 837 million, down 32%, with basic earnings per share at HKD 0.17 - Sales and distribution expenses significantly decreased by **56%** year-on-year to **HKD 58 million**, primarily due to a **25%** decline in clean coking coal sales volume and a lower proportion of rail transportation sales[192](index=192&type=chunk) - Profit attributable to owners of the company was approximately **HKD 837 million**, a **32%** year-on-year decrease; basic earnings per share were **HKD 0.17**, compared to HKD 0.244 in the prior period[201](index=201&type=chunk)[174](index=174&type=chunk) [Capital Structure and Liquidity](index=66&type=section&id=Capital%20Structure%20and%20Liquidity) As of June 30, 2024, the company had no borrowings, a 0% gearing ratio, a current ratio of 3.44 times, and approximately HKD 9.22 billion in free cash and bank deposits, indicating a highly robust financial position - The company has **no borrowings**, resulting in a **0%** gearing ratio[210](index=210&type=chunk) - The current ratio is **3.44 times**, with approximately **HKD 9.221 billion** in available free funds, indicating ample liquidity[214](index=214&type=chunk) [Future Prospects](index=68&type=section&id=Future%20Prospects) Looking ahead, management anticipates weak domestic real estate demand offset by infrastructure and manufacturing, with coking coal supply constrained by enhanced safety regulations supporting prices; Xingwu Coal Mine resumed production in July, expecting output recovery in H2, while the company focuses on intelligent construction and cost control for efficiency - Regarding downstream demand, steel demand from real estate remains sluggish, but infrastructure investment and steel exports continue to provide support[221](index=221&type=chunk) - On the supply side, strengthened coal mine safety regulations limit coking coal production, providing some price support, though rapid growth in overseas coking coal imports, especially from Mongolia, partially offsets domestic output declines[224](index=224&type=chunk)[225](index=225&type=chunk) - The company's Xingwu Coal Mine completed its production layer replacement and resumed operations in **July**, with output expected to gradually recover and return to normal in the second half of the year[231](index=231&type=chunk) [Dividends and Shareholder Information](index=52&type=section&id=Dividends%20and%20Shareholder%20Information) [INTERIM DIVIDEND](index=52&type=section&id=INTERIM%20DIVIDEND) The Board declared an interim dividend of **HKD 0.09** per ordinary share for the six months ended June 30, 2024, a decrease from HKD 0.10 per share in the prior period - The Board has declared an interim dividend of **HKD 0.09** per ordinary share for the six months ended June 30, 2024 (H1 2023: HKD 0.10 per share)[157](index=157&type=chunk) [DISCLOSURE OF INTERESTS](index=72&type=section&id=DISCLOSURE%20OF%20INTERESTS) As of June 30, 2024, major shareholders included Fude Life Insurance (28.38% stake), Shougang Group (17.52% stake), and Shoucheng Holdings (15.72% stake) Major Shareholders | Shareholder Name | Number of Shares Held | Percentage of Shareholding | | :--- | :--- | :--- | | **Fude Life Insurance** | 1,398,284,000 | 28.38% | | **Shougang Group** | 863,358,000 | 17.52% | | **Shoucheng Holdings** | 774,743,327 | 15.72% | [CORPORATE GOVERNANCE AND OTHER INFORMATION](index=76&type=section&id=CORPORATE%20GOVERNANCE%20AND%20OTHER%20INFORMATION) [Corporate Governance and Compliance](index=76&type=section&id=Corporate%20Governance%20and%20Compliance) During the reporting period, the company complied with the Listing Rules' Corporate Governance Code and the Model Code for Securities Transactions by Directors, with the Audit Committee reviewing the interim report and unaudited interim financial information - The company complied with the code provisions of the Corporate Governance Code as set out in Appendix C1 to the Listing Rules for the six months ended June 30, 2024[244](index=244&type=chunk) - The Audit Committee has reviewed the unaudited interim results for the six months ended June 30, 2024, and this interim report[256](index=256&type=chunk)

Investment Rating - The report maintains a "Buy" rating for Shougang Resources [3][10]. Core Views - The company's total revenue for the first half of 2024 was HKD 2.53 billion, a decrease of 27.6% year-on-year, while the profit attributable to shareholders was HKD 840 million, down 32%, aligning with market expectations [3]. - The production volume is expected to recover in the second half of the year, with an annual forecast of 4.8 to 5 million tons, following a decline due to temporary shutdowns [3]. - The average selling price of premium coking coal in the first half was HKD 1,938 per ton, a slight decrease of 2% year-on-year, while the average market benchmark price increased by 3% [3]. Summary by Sections Financial Performance - Total revenue for 2024 is projected at HKD 5.33 billion, with a year-on-year decrease of 9.58% [5]. - Net profit estimates for 2024 and 2025 have been revised down to HKD 1.695 billion and HKD 1.844 billion, respectively, reflecting a decrease of 6.55% and 5.36% [3][5]. - The company’s average cost per ton in the first half was HKD 450, up from HKD 401 in the previous year, primarily due to reduced production and increased resource taxes [3]. Production Insights - The company’s coal production in the first half was 2.25 million tons, a 15% decline year-on-year, with premium coking coal production down 31% to approximately 1.29 million tons [3]. - The company has a total approved production capacity of 5.25 million tons, with the Xingu mine accounting for 1.75 million tons, and is expected to achieve an annual production of 4.8 to 5 million tons [3]. Market Dynamics - The report notes a significant change in the sales structure, with low-sulfur premium coking coal sales dropping by 91%, now accounting for only 3% of total sales [3]. - The company’s coal washing rate fell below 60%, compared to over 70% in the first half of 2023, attributed to the temporary shutdown of the Xingu mine [3].

Investment Rating - The report assigns a rating of "Hold" for the company based on its current financial performance and future outlook [1]. Core Viewpoints - The company's revenue for the six months ending June 30, 2024, was HKD 2.498 billion, a decrease of 27% year-on-year, with gross profit falling to HKD 1.406 billion, down 37% [1]. - The attributable profit to shareholders was HKD 837 million, a decline of 32%, with basic earnings per share at HKD 0.17, and an interim dividend of HKD 0.09 per share proposed [1]. - The decrease in revenue and profit was primarily due to a drop in both the volume and price of premium coking coal, alongside rising production costs [1]. - The company expects to recover its production levels to between 5-5.25 million tons in the next year, following the successful commissioning of new mining operations [1]. - The company maintains a strong cash position of approximately HKD 9.22 billion, which supports its ability to sustain high dividend payouts despite reduced capital expenditures [1]. Summary by Sections Financial Performance - Revenue decreased to HKD 2.498 billion, a 27% decline year-on-year - Gross profit fell to HKD 1.406 billion, down 37% - Attributable profit to shareholders was HKD 837 million, a 32% decrease - Basic earnings per share were HKD 0.17, with an interim dividend of HKD 0.09 proposed [1]. Production and Costs - Premium coking coal sales volume dropped by 25%, with an average selling price down by 2% - Raw coking coal production decreased by 15%, with production costs rising by 13% to HKD 453 per ton [1]. - The company has adjusted its full-year production guidance for raw coking coal to 4.8-5.25 million tons for 2024 [1]. Future Outlook - Production is expected to recover to 5-5.25 million tons next year due to new mining operations coming online [1]. - The company anticipates a reduction in capital expenditures to approximately RMB 400-500 million, which will help maintain high dividend payouts [1].