CHINA COAL ENERGY(601898)：RESULTS BETTER THAN EXPECTED;MAINTAINING STABLE INTERIM DIVIDENDS

Core Viewpoint - China Coal's 1H25 results exceeded expectations due to effective cost reduction and expense control despite a decline in net profit and coal prices [1][2]. Financial Performance - A-shares net profit attributable to shareholders fell 21% YoY to Rmb7.71 billion, while recurring attributable net profit also dropped 21% YoY to Rmb7.65 billion [1]. - H-shares attributable net profit decreased 32% YoY to Rmb7.33 billion [1]. - In 2Q25, A-shares net profit attributable to shareholders rose 3.0% YoY but fell 3.0% QoQ to Rmb4.8 billion [1]. Production and Sales - Commercial coal output increased slightly by 1.3% YoY to 67.34 million tonnes, while sales volume decreased by 3.6% YoY to 128.68 million tonnes [1]. - Self-produced coal sales volume rose 1.4% YoY to 67.11 million tonnes [1]. - In 2Q25, commercial coal output and self-produced coal sales volume rose 0.7% YoY and 1.6% YoY to 33.99 million tonnes and 34.43 million tonnes, respectively [1]. Pricing and Costs - The selling price of self-produced coal fell 20% YoY to Rmb470 per tonne in 1H25, with a further decline to Rmb449 per tonne in 2Q25, down 21% YoY and 8.7% QoQ [1]. - The unit sales cost of self-produced coal dropped Rmb32 per tonne YoY to Rmb205 per tonne, with reductions in material, labor, and other costs [2]. Cash Flow and Capital Expenditure - Net operating cash inflow dropped Rmb8,244 million YoY to Rmb7,496 million, while capital expenditure reached Rmb6.972 billion [3]. Future Outlook - There is optimism for earnings recovery in 2H25, with spot coal prices rebounding from a YTD low [3]. - The firm proposed a stable interim dividend of Rmb0.166 per share, reflecting its commitment to rewarding shareholders despite industry pressures [3]. Earnings Forecast and Valuation - Earnings forecasts for 2025 and 2026 have been raised by 5% and 13% for A-shares, and 5% and 15% for H-shares, respectively [3]. - A-shares are trading at 9.8x and 9.0x 2025e and 2026e P/E, while H-shares are at 7.6x and 6.8x [3]. - Target prices for A-shares and H-shares have been raised by 8% to Rmb14.00 and 22% to HK$11.00, respectively, indicating potential upside [3].