Summary of Conference Call Notes Industry: Coal Sector Key Points 1. **Rising International Oil Prices**: International oil prices have surged recently, with a strong overall trend despite some fluctuations last week. Several oil-producing countries have indicated potential reductions in oil production, which may lead to continued unexpected increases in oil and gas prices. This situation is particularly affecting natural gas prices, which are rising and increasing coal substitution demand in regions like the EU and Japan, thereby pushing up high-calorific coal prices in the Asia-Pacific region and raising China's imported coal costs [1][2]. 2. **Impact of Indonesian Coal Production**: Since the beginning of the year, Indonesian coal production has contracted, which has positively influenced domestic coal prices. There is no need to worry about a seasonal decline in domestic coal prices, as the import coal prices have continued to rise. Additionally, domestic power plants are experiencing a premium on April's seasonal import coal prices, providing support for future domestic prices [2]. 3. **Limited Short-term Price Decline**: Although the domestic market typically faces a seasonal downturn in March and April, the support from import coal costs and the expected seasonal increase in non-electric industry operations suggest that any short-term price decline in coal may be very limited, with a quick rebound likely [2]. 4. **Improvement in Coking Coal Prices**: Beyond thermal coal, there are expectations for improvements in coking coal prices due to several factors: - The downstream black industry chain is gradually entering a peak season - Rising chemical product prices may enhance the profitability of coking by-products, leading to increased coking rates and demand for coking coal - Coking coal prices are expected to rise in tandem with thermal coal prices based on price relationship dynamics [2].

Group 1 - The coal ETF (515220) rose over 3% on February 24, indicating a potential upward trend in the coal sector due to supply-side factors [1] - As of February 5, private coal mines in Shaanxi began to suspend operations for the holiday, and from February 10, most private coal mines in Inner Mongolia also halted production, leading to a low overall operating level for coal mines [1] - The capacity utilization rate in the "Three West" regions is at 85.5%, a week-on-week decrease of 3.3 percentage points [1] Group 2 - The domestic coal production capacity is expected to decrease, and the quantity of imported coal is likely to shrink, suggesting that the bottom of the coal sector may have been reached, with an upward trend anticipated [2] - The coal ETF tracks the CSI Coal Index (399998), which selects listed companies involved in coal mining and processing, reflecting the overall performance of the coal industry with high dividend yields and cyclical volatility [2]

Investment Rating - The report maintains a "Buy" rating for leading companies in the coal mining sector, including China Shenhua, Shaanxi Coal and Energy, and others, indicating a positive outlook for their stock performance [13][14]. Core Viewpoints - The coal price has surged by 104 CNY/ton in just one month, reaching 809 CNY/ton, driven by strong demand and supply constraints [1][8]. - The report emphasizes a "stop-and-go" upward trend in coal prices, suggesting that any increase will not be linear but will involve periods of stabilization and correction [1][8]. - The demand for coal is expected to rise seasonally with the onset of heating in northern regions, while supply remains limited due to safety inspections and production constraints [1][8]. Summary by Sections Market Overview - The coal sector has seen a significant recovery, with the coal index rising by 4.43% recently, outperforming the broader market [2][80]. - The report notes a stark contrast in performance, with the coal sector previously lagging behind other sectors earlier in the year [2]. Price Dynamics - The report highlights that the coal price is influenced by three main factors: production cuts, low port inventories, and strong seasonal demand, which collectively catalyze rapid price increases [15][39]. - As of November 7, 2025, the average price of thermal coal at northern ports reached a new high of 809 CNY/ton, reflecting a weekly increase of 39 CNY/ton [9][39]. Supply and Demand Analysis - The report indicates that coal production has been constrained due to regulatory measures and safety inspections, leading to a continuous decline in output over the past three months [5][10]. - The demand for coal has exceeded expectations due to extreme weather conditions, which have significantly increased electricity consumption [5][10]. Investment Strategy - The report recommends focusing on high-quality stocks in the coal sector, particularly those with strong fundamentals and growth potential, while also considering second-tier stocks as coal prices continue to rise [6][14]. - Key companies to watch include China Shenhua, Shaanxi Coal, and others that are expected to benefit from the ongoing price increases and market dynamics [14][6].

Core Viewpoint - The report from CITIC Securities indicates that the net profit for the coal sector is expected to grow by approximately 22% quarter-on-quarter in Q3 2025, despite a year-on-year decline of about 29% in the first three quarters. The performance of thermal coal and anthracite companies has improved significantly, while coking coal companies continue to face downward pressure. The early release of winter storage demand has led to better-than-expected coal prices, with a potential quarter-on-quarter increase of over 15% in Q4 [1][2][4]. Group 1: Financial Performance - The net profit of listed coal companies decreased by 29% year-on-year in the first three quarters, but there was a 22% quarter-on-quarter increase in Q3, driven by rising market coal prices and improved profitability in thermal coal enterprises [2]. - The net profit changes for different coal types in Q3 were +29% for thermal coal, -52% for metallurgical coal, and +34% for anthracite, indicating significant performance divergence among sectors [2]. - The gross profit margin showed slight improvement in Q3, with a quarter-on-quarter increase of 0.95 percentage points, while operating cash flow per share rose from 0.29 yuan to 0.45 yuan [3]. Group 2: Market Outlook - The supply side is influenced by policy changes, with safety regulations and production checks slowing down coal production growth. The demand side has seen an early release of winter storage needs due to accelerated cooling in northern regions [4]. - The average price of thermal coal at ports is expected to rise by over 15% quarter-on-quarter in Q4, potentially exceeding 850 yuan per ton, while coking coal prices may also remain high with an expected increase of nearly 200 yuan per ton [4]. - The coal sector is anticipated to maintain a positive trend in Q4, supported by improved policies, coal prices, and performance expectations, with recommendations to focus on leading thermal coal companies and undervalued firms with good earnings elasticity [6].

Core Viewpoint - The report from Guosheng Securities expresses a strong optimism regarding the future performance of the coal sector, indicating a potential upward trend in coal prices as the year progresses [1] Summary by Relevant Sections - **Performance Overview**: As of September 19, the coal sector (CITIC) has experienced a decline of 2.3% year-to-date, ranking last among 30 industries. However, during the week of September 19, the sector saw a weekly increase of 3.6%, ranking second among the 30 industries, indicating a significant contrast in performance [1] - **Market Outlook**: The report suggests that the coal prices are on a path of oscillating upward movement, with expectations that they may close the year at their highest point, providing momentum for the sector's growth [1] - **Risks Identified**: Key risks include the potential for production from new mines to exceed expectations, lower-than-expected downstream demand, insufficient safety inspection efforts, and the possibility of historical trends becoming ineffective [1]