Orient Securities·2026-03-06 01:24Investment Rating - The report maintains a "Buy" rating for the coal industry, specifically recommending stocks such as Huabei Mining (600985), Pingmei Shenma (601666), Shanxi Coking Coal (000983), and Lu'an Environmental Energy (601699) [4][63]. Core Insights - The report emphasizes that the valuation of coking coal stocks should be viewed through an options perspective due to the higher volatility of coking coal prices compared to thermal coal prices. This approach reveals that the value of coking coal companies is significantly higher than traditional valuation methods [4][63]. - The current "anti-involution" policies are expected to provide a bottom support for coal prices, limiting the downside risk for coal companies while allowing for potential upside as prices rise [24][30]. - The report highlights that traditional valuation methods, such as DCF and replacement cost pricing, may not adequately capture the current dynamics of the coal market, particularly under the influence of "anti-involution" policies [9][10][12]. Summary by Sections Investment Recommendations and Targets - The report recommends increasing holdings in Huabei Mining (600985), Pingmei Shenma (601666), Shanxi Coking Coal (000983), and Lu'an Environmental Energy (601699) based on their strong earnings potential in the context of rising coal prices [4][63]. - The projected earnings per share for Huabei Mining are 0.57, 1.05, and 1.31 for the years 2025-2027, with a target price of 18.34 based on a PE ratio of 14 times the industry average for 2027 [67]. Valuation Methodology - The report argues that the traditional DCF model is limited in its ability to predict cash flows due to the cyclical nature of coal prices and the impact of policy changes [12][22]. - It suggests that the earnings of coal companies can be viewed as Asian call options, where the expected earnings are influenced by the volatility of coal prices, thus providing a more accurate valuation framework [9][31][63]. Market Dynamics - The report notes that the coal industry is experiencing a significant shift in pricing logic, with "anti-involution" measures providing a stabilizing effect on coal prices, which were previously subject to extreme fluctuations [22][24]. - It highlights that the supply of coking coal is expected to remain tight due to limited new capacity and regulatory constraints, which could support higher prices in the future [38][40].