Investment Rating - The investment rating for the coal industry is "Positive" (maintained) [1] Core Views - The report emphasizes that coal prices are returning to reasonable levels, reinforcing the logic of stable coal prices. The price of thermal coal has slightly decreased, with the Qinhuangdao Q5500 thermal coal closing at 695 CNY/ton as of January 17, down 4 CNY/ton from the previous period. The report anticipates a gradual recovery to a reasonable price of 750 CNY/ton, with narrow fluctuations expected [3][4] - The long-term investment logic remains unchanged, driven by a dual influence of tightening supply and increasing demand. Supply constraints are a continuation of the strict production checks initiated in July, while demand is rising due to the heating season and increased industrial production [3][4] Summary by Sections Investment Logic - Thermal coal prices are expected to rise through a four-step process: repairing central and local long-term contracts, reaching the coal-electricity profit-sharing line, and approaching the breakeven point for power plants, estimated at around 750 CNY/ton for 2025. The upper limit for coal prices is predicted to be between 800-860 CNY/ton [4][15] - Coking coal prices are more influenced by supply and demand fundamentals, with target prices based on the ratio of coking coal to thermal coal prices. The current ratio indicates target prices for coking coal at 1608 CNY, 1680 CNY, 1800 CNY, and 2064 CNY [4][15] Investment Recommendations - The report outlines a dual logic for coal stocks: cyclical elasticity and stable dividends. With both thermal and coking coal prices at historical lows, there is significant room for rebound. The report identifies four main lines for stock selection: 1. Cyclical logic: Jin控煤业, 兖矿能源 for thermal coal; 平煤股份, 淮北矿业, 潞安环能 for metallurgical coal 2. Dividend logic: 中国神华, 中煤能源, 陕西煤业 3. Diversified aluminum elasticity: 神火股份, 电投能源 4. Growth logic: 新集能源, 广汇能源 [5][16] Key Market Indicators - The coal index fell by 3.11% this week, underperforming the CSI 300 index by 2.54 percentage points. The average PE ratio for the coal sector is 15.12, and the PB ratio is 1.33, both ranking among the lowest in the A-share market [10][25][29]

Investment Rating - The investment rating for the coal industry is "Positive" (maintained) [1] Core Viewpoints - The report emphasizes that coal prices are expected to stabilize, with a long-term upward trend anticipated for both thermal coal and coking coal prices. The recent decline in prices is viewed as a temporary adjustment, with expectations for recovery towards the target price range of 800-860 RMB per ton for thermal coal [3][4][13]. Summary by Sections Industry Overview - The report highlights that as of December 12, the price of Qinhuangdao Q5500 thermal coal was 753 RMB per ton, down 38 RMB from the previous week. The price at Guangzhou Port was 815 RMB per ton, indicating a completion of the previously suggested coal-electricity profit-sharing target of 750 RMB [3][4]. Price Trends - Thermal coal prices have shown a recent decline but are expected to recover due to tightening supply and increasing demand, particularly as the heating season begins and industrial production ramps up towards year-end [4][5]. - Coking coal prices have rebounded significantly, with the price at Jing Tang Port reaching 1630 RMB per ton, up from a low of 1230 RMB in July, marking a 41.5% increase in futures prices [3][4]. Investment Logic - The report outlines a four-step process for the expected price recovery of thermal coal, including the restoration of long-term contracts and achieving a profit-sharing equilibrium between coal and power companies, with a target price of around 750 RMB for 2025 [4][13]. - Coking coal prices are expected to be more influenced by supply and demand fundamentals, with target prices set based on the ratio of coking coal to thermal coal prices [4][13]. Investment Recommendations - The report suggests a dual logic for investing in coal stocks: cyclical elasticity and stable dividends. It identifies four main lines for stock selection: 1. Cyclical logic: Jin Kong Coal Industry, Yanzhou Coal Mining 2. Dividend logic: China Shenhua, Zhongmei Energy 3. Diversified aluminum elasticity: Shenhua Co., Electric Power Investment Energy 4. Growth logic: Xinji Energy, Guanghui Energy [5][14]. Key Indicators - The coal index fell by 3.64% this week, underperforming the CSI 300 index by 3.56 percentage points. The average PE ratio for the coal sector is 14.76, and the PB ratio is 1.3 [10][17].

Report Summary 1. Current Situation of Coal Production - In July 2025, the raw coal output of industrial enterprises above the designated size was 380 million tons, a year - on - year decrease of 3.8%, with a daily average output of 1.229 million tons. From January to July, the raw coal output was 2.78 billion tons, a year - on - year increase of 3.8% [1]. - The July output was 40 million tons lower than the previous month but was the second - highest in the same period in history. The cumulative output from January to July was 2.78 billion tons, the highest in history, 130 million tons higher than the same period in 2024 [2]. 2. Completion of Annual Output Target - To achieve the annual expected output of 4.8 billion tons set by the Energy Bureau, the average monthly output from August to December needs to reach 404 million tons. Compared with the average monthly output of 397 million tons from January to July 2025, theoretically, only a monthly increase of one million tons in the national total raw coal output is required [2]. 3. Reasons for Output Decline in July - The decline in July was a seasonal one, and heavy rains in the self - production areas and the "Three Western Regions" exacerbated the decline. Historically, from 2019 - 2024, the average monthly raw coal output in the second half of the year often exceeded that in the first half [2]. 4. Regional Over - production and Price Concerns - The regional over - production situation from January - June/July 2025 may be weaker than the same period. The continuous rise in coal prices may trigger concerns of relevant departments about price regulation [2].

Core Viewpoint - The report from Founder Securities indicates an expected increase in thermal coal demand for the year, with tightening supply likely to further boost coal prices. This creates potential benefits for elastic and undervalued sectors, while high dividend-paying stocks may see valuation improvements due to established policy support for coal prices [1]. Group 1: Policy Changes and Impacts - A new coal mine production verification policy has been introduced, strictly controlling overproduction behaviors. The policy mandates that annual coal output must not exceed announced capacity, and monthly output must not exceed 10% of announced capacity, with non-compliant mines facing shutdowns for rectification [2]. - The evolution of coal supply policies reflects changing market dynamics, with past policies addressing issues of overcapacity, compliance, and now overproduction. The latest policy aims to regulate production behavior directly, indicating a responsive adjustment to market conditions [3]. Group 2: Supply and Demand Analysis - The supply control measures are expected to stabilize coal prices, while demand will determine the potential for price increases. Historical data shows that past policies have led to significant price increases following their implementation, suggesting a similar outcome may occur if demand improves [4]. - In the thermal coal sector, domestic production is expected to increase as safety inspections ease, while imports are declining due to reduced profitability. The current high temperatures are driving up demand, with power plants consuming more coal, indicating a potential year-on-year increase in coal usage [5]. - For coking coal, domestic production remains high, but falling prices have led to reduced operating rates in some mines. The inventory dynamics are complex, with downstream demand influencing stock levels, and expectations of rising prices prompting early inventory accumulation [5].