Investment Rating - The report maintains a "Positive" investment rating for the coal industry [13]. Core Insights - The coal price has bottomed out and is showing signs of recovery, leading to improved earnings for the coal sector in Q3 2025. The sector's revenue and profit have improved on a quarter-on-quarter basis despite a year-on-year decline [5][29]. - The report highlights that the domestic coal supply is being constrained due to production checks, while demand is gradually improving, particularly in the power sector, which is expected to support coal prices in the upcoming quarters [6][30]. Summary by Sections Industry Overview - In the first three quarters of 2025, the coal sector achieved a revenue of CNY 849.4 billion, down 18.2% year-on-year, and a net profit of CNY 82.05 billion, down 29.4% year-on-year. In Q3 2025, the sector's revenue was CNY 300.86 billion, down 11.4% year-on-year but up 11.8% quarter-on-quarter, with a net profit of CNY 29.29 billion, down 24.6% year-on-year but up 21.4% quarter-on-quarter [5][6]. Thermal Coal - The thermal coal segment reported a revenue of CNY 677.3 billion in the first three quarters of 2025, down 16% year-on-year. In Q3 2025, the revenue was CNY 242.4 billion, down 7% year-on-year but up 13% quarter-on-quarter. The average price for Qinhuangdao Shanxi-produced thermal coal (Q5500) in Q3 was CNY 672 per ton, down 21% year-on-year but up 6% quarter-on-quarter [6][29]. Coking Coal - The coking coal segment saw a revenue of CNY 125.8 billion in the first three quarters of 2025, down 29% year-on-year. In Q3 2025, the revenue was CNY 42.7 billion, down 28% year-on-year but up 7% quarter-on-quarter. The average price for coking coal at Jing Tang Port was CNY 1,562 per ton, down 18% year-on-year but up 19% quarter-on-quarter [7][29]. Investment Recommendations - The report suggests focusing on the recovery opportunities in the coal sector, emphasizing companies with low price-to-book ratios and dividends. Key recommendations include Yanzhou Coal Mining Company, Electric Power Investment Corporation, and New Hope Liuhe Company for their growth potential and stability [8].

Summary of Conference Call Notes Industry Overview: Coal Market - Historical data indicates significant price increases for thermal coal from late 2020 to early 2021, throughout 2021, in 2022, and from June to October 2023, primarily driven by supply-side constraints such as policy restrictions, safety inspections, and international conflicts, alongside a recovery in demand [1][4][6] - The current thermal coal market is expected to face tight supply due to central safety inspections, with early winter and La Niña phenomena increasing the likelihood of price rises in the autumn [1][6] - There is a demand for stockpiling before the end of October, suggesting a higher probability of price increases in Q4, supported by both commodity and equity sides [1][6] Key Insights and Arguments - The interest rate cut cycle typically benefits commodities, with thermal coal showing strong correlation with copper and aluminum due to high electricity demand [1][7] - The coal sector exhibits low price-to-book (PB) ratios, low trading volumes, and dividend attributes, making it a defensive yet opportunistic investment [2][3] - The price of coking coal has been fluctuating due to overproduction checks, with steel mill profits improving, leading to an expected stable price trend [10] Investment Recommendations - Companies with growth potential and elasticity such as Yanzhou Coal Mining Company (兖矿) and China Power Investment Corporation (电投) are recommended. Yanzhou is expected to increase its equity production by 50% over the next five years, while China Power will benefit from new aluminum production capacity [1][8][9] - Other companies with good price elasticity include Jin控潞安 and Huai Coal, with a focus on bottom reversal opportunities and seasonal price increases [10] Additional Important Points - The coal price increases in the past five years were significantly influenced by supply tightening measures, including production restrictions and geopolitical events like the Russia-Ukraine conflict [4][5] - The current market environment is characterized by a potential for price increases due to supply constraints and seasonal demand, with a focus on the specific demand conditions in November and December [6][10] - The overall sentiment suggests a systemic bull market could emerge if interest rate cuts stimulate economic recovery, particularly benefiting the coal sector [7]