Changjiang Securities·2025-05-08 11:16Investment Rating - The report maintains a "Positive" investment rating for the coal industry [3]. Core Viewpoints - The coal industry is experiencing a paradigm shift from performance-driven growth to valuation-driven growth, influenced by supply constraints and stable coal prices [10][16]. - The long-term contracts in the coal sector are enhancing the stability of earnings, providing a buffer against market volatility [24][28]. - The report highlights that despite recent price declines, the coal sector's defensive attributes may offer unique advantages in uncertain market conditions [60][66]. Summary by Sections 1. What to Invest in the Coal Industry? - The focus is on long-term contracts and stable coal prices as key investment areas [8]. 2. Why Shift from Performance to Valuation? - Supply elasticity is decreasing, leading to enhanced stability in return on equity (ROE) [18][21]. - The increase in capital expenditures since 2021 has been significant, with new coal mine approvals becoming more complex and costly [19][20]. - The long-term contract mechanism is crucial for stabilizing earnings expectations in the coal sector [24][27]. 3. Why Has the Coal Sector Seen Significant Corrections Since H2 2024? - The fundamental issue stems from strong supply and weak demand, leading to a surplus in coal supply [39][41]. - The decline in electricity prices has pressured profit margins across the coal-electricity supply chain [39][41]. 4. Can the Sector Still Rise Despite Weak Demand? - Concerns about demand are driven by a slowdown in electricity consumption growth and the increasing substitution of coal by renewable energy sources [48][53]. - The report suggests that even with demand concerns, coal's defensive characteristics may still provide stability in performance [60][66]. 5. Long-term Outlook for Thermal Coal - The report anticipates a marginal improvement in coal supply-demand dynamics by late May 2025, with potential support for coal prices [66][67].