Core Viewpoint - The China Securities Hong Kong 300 Upstream Index (H300 Upstream) has shown a recent increase of 12.00% over the past month, despite a decline of 2.47% over the last three months and a year-to-date decrease of 2.19% [2]. Group 1: Index Performance - The H300 Upstream Index reported a value of 2304.31 points [1]. - The index is based on the China Securities Hong Kong 300 Index, which selects securities according to industry classification to reflect the overall performance of various thematic securities listed on the Hong Kong Stock Exchange [2]. Group 2: Index Holdings - The top ten weighted stocks in the H300 Upstream Index are: - China National Offshore Oil Corporation (29.2%) - PetroChina Company Limited (12.49%) - Zijin Mining Group (10.46%) - China Shenhua Energy Company (9.9%) - China Petroleum & Chemical Corporation (9.54%) - China Hongqiao Group (3.74%) - China Coal Energy Company (3.28%) - Zhaojin Mining Industry Company (3.26%) - Yanzhou Coal Mining Company (2.64%) - Luoyang Molybdenum Co., Ltd. (2.41%) [2]. Group 3: Sector Composition - The H300 Upstream Index is fully composed of stocks listed on the Hong Kong Stock Exchange [3]. - The sector composition of the index includes: - Oil and Gas: 51.64% - Coal: 17.92% - Precious Metals: 15.77% - Industrial Metals: 10.00% - Rare Metals: 3.17% - Oil and Gas Extraction and Oilfield Services: 1.07% - Other Non-ferrous Metals and Alloys: 0.43% [3]. Group 4: Index Adjustment - The index samples are adjusted semi-annually, with adjustments occurring on the next trading day after the second Friday of June and December each year. Temporary adjustments may occur under special circumstances [3].

Group 1: 2024 Performance Overview - The coal sector's overall net profit excluding non-recurring items is expected to decline by 20% year-on-year, with an average ROE of approximately 10% [1] - The total profit of large coal enterprises is projected to be 604.6 billion yuan, a year-on-year decrease of 22.2% [1] - Key coal companies are expected to achieve a net profit attributable to shareholders of 157.3 billion yuan and a net profit excluding non-recurring items of 155.5 billion yuan, down 18.6% and 19.7% year-on-year, respectively [1] Group 2: 2024 Operational Overview - The total coal production of 28 key coal companies is estimated at 1.34 billion tons, a year-on-year increase of 2.0% [2] - The weighted average net profit per ton of coal is approximately 131 yuan, reflecting a year-on-year decline of 25% [2] - The weighted average coal price and cost are projected to decrease by 7% and remain stable, respectively [2] Group 3: Q1 2025 Performance Overview - The sector's profit is expected to decline by 27% year-on-year, with an average net profit margin of around 11% [3] - The total net profit attributable to shareholders for Q1 2025 is projected to be 31 billion yuan, down 27.3% year-on-year [3] - The average gross profit margin and net profit margin for Q1 2025 are expected to drop to 25% and 11%, respectively [3] Group 4: Q1 2025 Operational Overview - The coal production of 24 companies is expected to reach 304 million tons, a year-on-year increase of 5.7% [4] - The weighted average net profit per ton of coal is projected to decrease to 97 yuan, with coal prices and costs declining by 18% and 15%, respectively [4] - Some companies, such as Shaanxi Energy and Yancoal, are expected to maintain a net profit per ton exceeding 100 yuan [4] Group 5: Industry Outlook - Seasonal demand for thermal coal is expected to improve marginally after May, with expectations of increased industrial demand and reduced coal imports [5] - Coal prices are anticipated to gradually recover after inventory declines, despite a potential downward trend in the price center for 2025 [5] Group 6: Key Companies - Companies with stable profits and high dividends include Shaanxi Coal and China Shenhua [6] - Companies with low valuations and long-term growth potential include China Coal Energy and Yancoal [6] - Companies benefiting from positive demand expectations and low PB ratios include Huabei Mining and Shanxi Coking Coal [6]

Core Insights - The Guozheng Free Cash Flow Index has seen a slight increase of 0.07%, with notable gains in constituent stocks such as Chanzhan Optoelectronics and others [1] - The Free Cash Flow ETF (159201) is experiencing a tight market with a latest price of 0.98 yuan, and has shown a cumulative increase of 1.56% over the past two weeks [1] - The ETF has recorded a significant liquidity with a turnover rate of 6.27% and a transaction volume of 206 million yuan [1] - The ETF's average daily trading volume over the past year is 302 million yuan, ranking first among comparable funds [1] - The Free Cash Flow ETF has seen a net inflow of 57.37 million yuan recently, accumulating a total of 38.99 million yuan over the last 19 trading days [1] Fund Performance - The latest financing buy-in amount for the Free Cash Flow ETF is 3.147 million yuan, with a financing balance of 51.24 million yuan [3] - The tracking error for the ETF year-to-date is 0.163%, the lowest among comparable funds [3] - The current price-to-earnings ratio (PE-TTM) for the index is 11.78, indicating a valuation lower than 80.41% of the time over the past year, suggesting a historical low [3] Top Holdings - As of April 30, 2025, the top ten weighted stocks in the Guozheng Free Cash Flow Index include Midea Group, China National Offshore Oil Corporation, and others, collectively accounting for 56.66% of the index [3]

Core Insights - The coal industry in China reported mixed results for Q1 2025, with over 70% of listed coal companies remaining profitable, yet most experienced significant declines in net profit year-on-year, with some companies even reporting losses [1][4][12] - Baofeng Energy, led by Ningxia's richest man, achieved a remarkable net profit growth of 71.49%, standing out in an otherwise declining industry [1][8] Financial Performance Summary - Major coal companies reported the following net profits and year-on-year changes: - China Shenhua: 11.949 billion, -17.96% - Shaanxi Coal and Chemical: 4.805 billion, -1.23% - Baofeng Energy: 2.437 billion, +71.49% [2] - A total of 32 out of 39 listed coal companies saw a decline in net profit, with 12 companies experiencing declines over 30% [4][12] Factors Behind Profit Decline - Market price fluctuations have directly impacted coal company profits, with average prices for major coal types, such as thermal coal, dropping approximately 25% year-on-year [5][6] - The supply-demand imbalance is exacerbated by a warm winter and increased renewable energy generation, which saw a 18.7% year-on-year increase in wind and solar power output [5][12] - Rising production costs due to deeper mining and increased safety and environmental expenditures have further squeezed profit margins [6][12] Baofeng Energy's Growth Strategy - Baofeng Energy's success is attributed to its integrated "coal-coke-chemical" business model, which allows it to convert raw material advantages into high-value products [8][9] - The company's olefin project has become a significant profit driver, with a production efficiency that exceeds industry averages [8][9] - Investment in technology and digital transformation has enhanced operational efficiency and reduced costs, contributing to its strong performance [9][11] Industry Challenges - The coal industry faces significant challenges from the dual carbon goals and the increasing competitiveness of renewable energy sources [12][13] - The average utilization hours for thermal power plants have decreased, indicating a decline in coal demand [13][14] - The industry is experiencing a supply surplus, with total coal production capacity exceeding 4.5 billion tons per year, while consumption is projected at around 4.2 billion tons [13][14] Conclusion - The Q1 2025 performance of the coal industry reflects the urgent need for transformation amid evolving energy dynamics, with a clear divide emerging between companies that adapt and those that do not [16]

Investment Rating - The report maintains a positive outlook on the coal industry, indicating an "Overweight" rating [1]. Core Insights - The report highlights that coal prices are under pressure during the off-season, with a forecasted contraction in imports expected to support prices [1]. - The report emphasizes that domestic coal production is expected to stabilize, with a potential rebound in coking coal prices as demand increases in the peak season [1]. - Key recommended stocks include China Shenhua, Shaanxi Coal, and China Coal Energy for stable operations and high dividends, while Huabei Mining and Pingmei Shenma are noted for their undervalued growth potential [1]. Summary by Sections Recent Industry Policies and Dynamics - New energy consumption limits for various industries, including coal, are set to take effect, potentially saving 24.52 million tons of standard coal annually [9]. - Coal production in major provinces like Shanxi and Inner Mongolia has seen significant year-on-year growth, contributing to a record high in domestic coal output [9]. Price Trends - As of April 30, 2025, the prices for various grades of thermal coal have seen slight declines, with Q4500, Q5000, and Q5500 thermal coal prices reported at 508, 570, and 650 CNY/ton respectively [1][10]. - Coking coal prices have remained stable, with key prices reported at 1380 CNY/ton for Shanxi's main coking coal [1][13]. Inventory and Demand - The average daily coal inflow to the Bohai Rim ports increased by 4.62% to 1.9614 million tons, while the outflow decreased by 1.14% to 1.9894 million tons [21]. - Port inventories decreased slightly to 31.035 million tons, reflecting a 0.21% drop [21]. Shipping Costs - Domestic coastal shipping costs have risen slightly, with average freight rates reported at 37.57 CNY/ton, marking a 0.31% increase [28]. - International shipping rates have also seen increases, particularly for coal from Indonesia and Australia [28]. Company Valuations - The report includes a valuation table for key companies, highlighting their stock prices, market capitalizations, and earnings per share (EPS) forecasts for 2024 to 2027 [34].

Investment Rating - The investment rating for the coal industry is "Positive" [2] Core Viewpoints - The current phase is seen as the beginning of a new upward cycle for the coal economy, with a resonance between fundamentals and policies, making it an opportune time to accumulate coal sector investments [11][12] - The underlying investment logic of coal capacity shortages remains unchanged, with a short-term supply-demand balance and a long-term gap still present [11][12] - The trend of coal prices establishing a bottom and moving to a new platform is expected to continue, with high profitability, cash flow, return on equity (ROE) of 10-20%, and dividend yields over 5% for quality coal companies [11][12] - The coal sector is considered undervalued, with overall valuation expected to improve, supported by high premiums in the primary mining rights market and a price-to-book (PB) ratio around 1 for most companies [11][12] Summary by Sections Coal Price Trends - As of May 4, the market price for Qinhuangdao port thermal coal (Q5500) is 652 CNY/ton, down 3 CNY/ton week-on-week [3][30] - The price for Shanxi-produced coking coal at Jingtang port remains stable at 1400 CNY/ton [32] Supply and Demand Tracking - The capacity utilization rate for sample thermal coal mines is 93.9%, down 0.3 percentage points week-on-week, while the utilization rate for coking coal mines is 89.74%, up 1.36 percentage points [4][47] - Daily coal consumption in inland provinces decreased by 18.40 thousand tons/day (-6.21%), while consumption in coastal provinces increased by 9.30 thousand tons/day (+5.27%) [4][48] Inventory and Transportation - As of April 29, coal inventory in inland provinces increased by 2.59% week-on-week, while coastal provinces saw a 0.77% increase [48] - The daily coal consumption in coastal provinces is showing an upward trend, indicating a potential increase in demand as the summer peak approaches [4][48] Investment Recommendations - Focus on stable and robust performers such as China Shenhua, Shaanxi Coal, and China Coal Energy, as well as companies with high elasticity like Yanzhou Coal and China Power Investment [12]

Investment Rating - The investment rating for the coal industry is "Positive" [2] Core Viewpoints - The current phase is seen as the beginning of a new upward cycle for the coal economy, with a resonance between fundamentals and policies, making it an opportune time to accumulate coal sector investments [11][12] - The underlying investment logic of coal capacity shortages remains unchanged, with a short-term supply-demand balance and a long-term gap still present [11] - The trend of coal prices establishing a bottom and moving to a new platform is expected to continue, with high profitability, cash flow, return on equity (ROE) of 10-20%, and dividend yields over 5% for quality coal companies [11][12] - The coal sector is considered undervalued, with overall valuation expected to improve, supported by high premiums in the primary mining rights market and a price-to-book (PB) ratio around 1 for most companies [11][12] Summary by Sections Coal Price Trends - As of May 4, the market price for Qinhuangdao port thermal coal (Q5500) is 652 CNY/ton, down 3 CNY/ton week-on-week [3][30] - The price for Shanxi-produced coking coal at Jingtang port remains stable at 1400 CNY/ton [32] Supply and Demand Tracking - The capacity utilization rate for sample thermal coal mines is 93.9%, down 0.3 percentage points week-on-week, while the utilization rate for coking coal mines is 89.74%, up 1.36 percentage points [4][47] - Daily coal consumption in inland provinces decreased by 18.40 thousand tons/day (-6.21%), while consumption in coastal provinces increased by 9.30 thousand tons/day (+5.27%) [4][48] Inventory and Transportation - As of April 29, coal inventory in inland provinces increased by 2.59% week-on-week, while coastal provinces saw a 0.77% increase [48] - The daily coal consumption in coastal provinces is showing an upward trend, indicating a potential increase in demand as the summer peak approaches [4][48] Investment Recommendations - Focus on stable and robust performers such as China Shenhua, Shaanxi Coal, and China Coal Energy, as well as companies with high elasticity like Yanzhou Coal and China Power Investment [12]

Investment Rating - The report maintains an "Overweight" rating for the coal mining industry [4] Core Viewpoints - The expectation of increased steel import tariffs in India is likely to boost demand for South African thermal coal, as the tariffs aim to protect domestic steel producers from low-priced imports [2] - The report highlights potential investment opportunities in companies such as Shenhua Energy, Shaanxi Coal and Chemical Industry, and others, suggesting that these companies may benefit from the current market dynamics [3][6] Summary by Sections Coal Mining - As of April 30, 2025, coal prices showed mixed trends: Newcastle coal (6000K) increased by $3.8/ton (+4.1%) to $97.5/ton, while European ARA coal decreased by $1.0/ton (-1.1%) to $93.8/ton [1][37] - South African coal exports are expected to rebound to over 6 million tons due to increased demand from the sponge iron industry [7] Investment Recommendations - The report recommends buying shares in companies such as Shaanxi Coal, China Shenhua, and others, with projected earnings per share (EPS) and price-to-earnings (PE) ratios indicating potential growth [6] - Specific companies highlighted for their strong performance include China Coal Energy and Jinneng Holding, with EPS forecasts for 2024 ranging from 1.21 to 2.95 [6] Market Trends - The report notes a significant drop in energy prices, with Brent crude oil down by $3.00/barrel (-4.54%) and WTI down by $4.06/barrel (-6.52%) as of the latest review [1][14] - The overall coal market is experiencing fluctuations, with the potential for increased operational costs due to transportation challenges in South Africa [7]

Investment Rating - The report maintains a "Buy" rating for the company, indicating a positive outlook for future performance [3][5][12]. Core Views - The company's Q1 2025 performance was impacted by declining coal prices, with a year-on-year revenue decrease of 15.4% and a net profit decline of 20.0% [1]. - Despite the challenges in the coal sector, the company is expected to maintain stable operations and has plans for a mid-term cash dividend of at least 30% of net profit [3]. - The company’s non-coal business showed resilience, with improved profitability in products like polyethylene and methanol, despite a slight decline in overall revenue [2]. Summary by Sections Financial Performance - In Q1 2025, the company reported revenue of 38.39 billion yuan, down 15.4% year-on-year, and a net profit of 3.98 billion yuan, down 20.0% year-on-year [1]. - Coal production slightly increased by 1.9% to 33.35 million tons, while coal prices fell significantly, affecting overall profitability [1]. - The average selling price of self-produced coal was 492 yuan per ton, a decrease of 17.7% year-on-year, leading to a gross profit margin decline [1]. Non-Coal Business - The non-coal business generated revenue of 7.142 billion yuan, down 9.7% year-on-year, but with a gross profit of 2.01 billion yuan, reflecting a smaller decline of 6.6% [2]. - The profitability of polyethylene and methanol improved, with methanol turning profitable with a gross profit of 380 yuan per ton [2]. Dividend and Shareholder Confidence - The company plans to continue its mid-term cash dividend policy, with a minimum payout ratio of 30% based on net profit [3]. - The controlling shareholder, China Coal, plans to increase its stake in the company, demonstrating confidence in its future performance [3]. Earnings Forecast and Valuation - The report forecasts net profits of 17.3 billion yuan for 2025, with corresponding EPS of 1.31 yuan [3]. - The company is valued at a price-to-book (PB) ratio of less than 1, indicating it is undervalued relative to its assets [3].

Core Viewpoint - The coal chemical industry in China is characterized by a diverse range of listed companies, each with distinct business layouts and performance metrics, focusing on both traditional and modern coal chemical products [1][3][20]. Industry Overview - The coal chemical industry is supported by upstream coal mining companies, which provide raw materials, and is influenced by coal price fluctuations that affect production costs and profit margins [1]. - The industry is divided into traditional coal chemical (e.g., coal-based fertilizers, synthetic ammonia) and modern coal chemical (e.g., new coal-based energy and materials) [1]. Key Listed Companies - Major listed companies in the coal chemical sector include China Shenhua (601088), Yanzhou Coal (600188), Baofeng Energy (600989), and others, with varying degrees of involvement in the coal chemical value chain [1][3][4]. - China Shenhua is recognized as a global leader in coal-based comprehensive energy [3]. Financial Performance - In the first half of 2024, China Shenhua reported revenues of 1680.78 billion, while other companies like Yanzhou Coal and Baofeng Energy reported revenues of 723.12 billion and 168.97 billion respectively [4][5]. - The overall gross profit margins in the coal chemical sector vary significantly, with Baofeng Energy achieving a gross margin exceeding 40% [19]. Business Layout and Strategy - Companies are strategically located in resource-rich regions, primarily in North and East China, focusing on traditional coal chemical products while expanding into modern coal chemical sectors [16][18]. - Business strategies emphasize safety, environmental protection, energy efficiency, and technological advancement to align with national policies and market demands [20][21]. Employee Composition - China Shenhua has the largest workforce in the sector, employing approximately 83,400 individuals, including 11,400 technical staff [11]. Future Planning - Companies are focusing on high-quality development, with plans to enhance core competencies, ensure energy security, and promote green and sustainable practices [21][22].