Investment Rating - The report maintains an "Increase" rating for the coal mining industry [4] Core Insights - The coal mining industry has experienced a significant reduction in historical burdens since the supply-side reform in 2016, leading to improved financial health for many companies despite a decline in coal prices since early 2024 [1][9] - The report emphasizes two key viewpoints: the expectation of a recovery in profitability for coal companies following the price low observed in June, and the anticipation that coal prices may peak by the end of the year [5][57] Summary by Sections Cash King - As of the end of H1 2025, certain companies have cash reserves (cash and cash equivalents + trading financial assets) significantly exceeding their interest-bearing debts, indicating strong liquidity [1][9] - The top five companies by cash reserves are China Shenhua, Jinkong Coal Industry, China Coal Energy, Lu'an Environmental Energy, and Shaanxi Coal Industry [14] Low Debt - The asset-liability ratio for the coal industry was 60.6% as of H1 2025, with a year-on-year increase of 0.7 percentage points [15] - The companies with the lowest asset-liability ratios include Jinkong Coal Industry, Electric Power Investment Energy, China Shenhua, Shanghai Energy, and Hengyuan Coal Power [15] Strong Foundation - The report highlights the importance of special reserves, which are funds set aside for safety production and maintaining simple reproduction [21] - The top five companies by net increase in special reserves from the end of 2023 to H1 2025 are China Shenhua, Shaanxi Coal Industry, Yitai B Share, Pingmei Shenma, and Gansu Energy [24] High Potential - The report evaluates companies based on the ratio of operating cash flow minus net profit, depreciation, and financial expenses to net profit, indicating future profit release potential [2][43] - The companies with the highest potential for profit release are Haohua Energy, Yitai B Share, Huabei Mining, China Shenhua, and China Coal Energy [43] Dividend King - The report notes that coal companies have been actively engaging in cash dividends and share buybacks, reflecting a strong commitment to returning value to shareholders [48] - The top five companies by cumulative cash dividends over the past three years are China Shenhua, Shaanxi Coal Industry, Yitai B Share, China Coal Energy, and Lu'an Environmental Energy [51] Investment Recommendations - The report suggests that companies with strong earnings elasticity such as Lu'an Environmental Energy, Yitai B Share, and Jinkong Coal Industry are worth considering [57][58] - It also highlights the importance of focusing on central state-owned enterprises like China Coal Energy and China Shenhua, as well as companies showing signs of recovery like China Qinfa [58]

Investment Rating - The report maintains a "Recommended" rating for the company, considering the potential reversal in coal prices [3][5]. Core Views - The company reported a significant decline in revenue and net profit for the first half of 2025, with revenue at 9.66 billion yuan, down 31.3% year-on-year, and net profit at 655 million yuan, down 49.3% year-on-year [1]. - In Q2 2025, the company showed signs of recovery with a revenue of 5.16 billion yuan, reflecting a 14.6% increase quarter-on-quarter, and a net profit of 400 million yuan, up 56.9% quarter-on-quarter [1][2]. - The report forecasts net profits for 2025-2027 to be 1.332 billion yuan, 1.521 billion yuan, and 1.633 billion yuan respectively, translating to EPS of 0.67 yuan, 0.77 yuan, and 0.82 yuan, with corresponding PE ratios of 15, 13, and 12 times [3][4]. Summary by Sections Financial Performance - In H1 2025, the company produced 17.82 million tons of raw coal, up 15.9% year-on-year, while total coal sales were 17.88 million tons, down 14.1% year-on-year [2]. - The average selling price of coal decreased by 21.3% year-on-year to 519.9 yuan per ton, with the cost of self-produced coal at 353.7 yuan per ton, down 18.8% year-on-year [2]. - Q2 2025 saw a raw coal production of 8.73 million tons, with total coal sales at 10.26 million tons, reflecting a 34.4% increase quarter-on-quarter [2]. Profitability Metrics - The gross margin for coal business was 32.0% in H1 2025, down 2.1 percentage points year-on-year, while the gross margin for self-produced coal was 50.6%, down 4.7 percentage points year-on-year [2]. - In Q2 2025, the coal business gross margin was 30.1%, down 4.0 percentage points quarter-on-quarter, with self-produced coal gross margin at 47.4%, down 7.0 percentage points quarter-on-quarter [2]. Future Projections - The report projects a revenue of 25.82 billion yuan for 2025, a decrease of 12.7% year-on-year, with a gradual recovery expected in subsequent years [4][10]. - The net profit is expected to decline by 41.3% in 2025, followed by a recovery in 2026 and 2027 with growth rates of 14.2% and 7.4% respectively [4][10].

Market Performance - The coal sector has underperformed, with the CITIC Coal Index declining by 10.77% from the beginning of 2025 to June 30, 2025, lagging behind the CSI 300 Index by 10.80 percentage points, ranking last among 30 industries [1][14][15] - The decline is attributed to weak demand for thermal power, leading to a continuous drop in coal prices and a significant decrease in coal company profits, raising concerns about the sustainability of high dividends in the coal industry [1][15] Fund Holdings - As of the end of Q2 2025, the proportion of active funds holding coal stocks decreased to 0.36%, down 0.08 percentage points from Q1 2025. Index funds' holdings also fell to 0.71%, a decrease of 0.12 percentage points [1][19] - The combined holding of both types of funds in the coal sector is now 0.52%, down 0.09 percentage points from Q1 2025 [1][19] Cost Perspective on Coal Price Valuation - The complete cost curve for 16 listed thermal coal companies indicates that the complete cost per ton of coal is approximately 390 CNY/ton, suggesting a port price of 640 CNY/ton. The port coal price fell to 618 CNY/ton in early June, indicating that over 20% of coal production capacity could face losses at this price level [2] - The current coal price is considered low in terms of valuation, as it is near the cost line, which could lead to production cuts if prices remain below cost [2] Historical Policy Interventions - Historical analysis shows that significant policy interventions were necessary for coal price reversals in 2008, 2015, and 2020. Each price bottom was accompanied by government actions to stimulate demand or control supply [3] - The report emphasizes that policy intervention is a necessary condition for coal price recovery, with expectations for potential government actions to support prices in the current context [3] Thermal Coal Price Outlook - The report suggests that the current thermal coal price of 618 CNY/ton may represent a bottom, with potential for recovery driven by improved demand in the second half of 2025 [4][6] - Two scenarios are outlined: an optimistic scenario where demand improves significantly, and a pessimistic scenario where demand remains weak, potentially leading to further price declines [6] Coking Coal Market Dynamics - The coking coal market has seen significant price drops due to supply-demand imbalances, with low-sulfur coking coal prices falling to around 1100 CNY/ton. The report indicates that this decline has already reflected market expectations [5][7] - The report highlights the importance of inventory rebuilding and the enforcement of production limits to support price recovery in the coking coal market [7] Investment Recommendations - The report recommends focusing on major coal enterprises such as China Shenhua and China Coal Energy, as well as companies with significant earnings elasticity like Lu'an Huanneng and Jinneng Holding [8] - The report also notes the potential for price recovery in coking coal, with expectations for prices to rise to a range of 1500-2000 CNY/ton in the long term [7][8]