Ge Long Hui·2025-10-27 12:59Core Viewpoint - China Shenhua Energy reported mixed financial results for 3Q25, with net profit showing a decline year-over-year but an increase quarter-over-quarter, primarily driven by the power business's performance [1][2]. Financial Performance - Net profit attributable to shareholders of Shenhua A-shares decreased by 6% YoY but increased by 14% QoQ to Rmb14.4 billion, while recurring net profit fell 13% YoY but rose 14% QoQ to Rmb14.4 billion [1]. - For Shenhua H-shares, net profit dropped 12% YoY but grew 10% QoQ to Rmb14.7 billion [1]. Business Segments - The power business significantly contributed to the improved profit, with gross profit rising Rmb1.93 billion QoQ to Rmb27.5 billion in 3Q25. In contrast, the coal business's gross profit fell Rmb1.01 billion QoQ to Rmb16 billion [2]. - Commercial coal output increased by 2.3% YoY and 3.1% QoQ to 85.5 million tonnes, while self-produced coal sales rose by 2.7% YoY and 4.1% QoQ to 86.8 million tonnes [2]. Pricing and Costs - The selling price of self-produced coal decreased by 13% YoY and 3.7% QoQ to Rmb455 per tonne in 3Q25 [3]. - Qinhuangdao 5,500kcal thermal coal prices fell 21% YoY but rose 5.6% QoQ, with expectations for price improvement in 4Q25 due to rising coal prices since October [4]. - Production cost per tonne of self-produced coal fell 5.3% YoY but increased 3.0% QoQ to Rmb164.5 [4]. Electricity Business - In 3Q25, the electricity sales price decreased by 4.9% YoY and 2.6% QoQ to Rmb0.376 per kWh, while sales volume rose 32% QoQ to 60.18 billion kWh [4]. - Electricity sales cost fell 14% YoY and 12% QoQ to Rmb0.298 per kWh, with expectations for slight recovery in costs in 4Q25 as coal prices rebound [4]. Financial Forecasts and Valuation - Earnings forecasts for 2025 and 2026 were raised by 6% and 3% for A-shares, and by 5% and 3% for H-shares, now projected at Rmb53.4 billion and Rmb54.2 billion for A-shares, and Rmb56.5 billion and Rmb57.3 billion for H-shares [5]. - A-shares are trading at 15.8x 2025e and 15.6x 2026e P/E, while H-shares are at 13.3x 2025e and 12.9x 2026e P/E [5]. Target Prices - Target prices for A-shares and H-shares were raised by 10% and 25% to Rmb46 and HK$45, respectively, implying 17.1x 2025e and 16.9x 2026e P/E for A-shares, and 14.5x 2025e and 14.1x 2026e P/E for H-shares [6]. - The target prices suggest upside potential of 8.2% for A-shares and 9.2% for H-shares [6].