Core Viewpoint - The coal industry is experiencing a supply-demand imbalance, with limited reduction in imports and increased domestic production leading to oversupply [2][5]. Group 1: Fundamentals - In Q1 2025, China's total coal imports reached 110 million tons, a year-on-year decrease of 0.9%, maintaining a high level. Notably, imports from Indonesia were 52.59 million tons (down 6.6%), Australia 16.45 million tons (up 3.7%), Mongolia 17.49 million tons (up 3.1%), and Russia 19.62 million tons (up 7.9%) [2]. - Domestic raw coal production in Q1 2025 was 1.2 billion tons, a year-on-year increase of 8.8%. The production growth rates in Xinjiang, Shanxi, Shaanxi, and Inner Mongolia were 16.9%, 19.8%, 4.1%, and 2.1%, respectively [2]. - In Q1 2025, China's thermal power generation was 1.5 trillion kWh, down 4.4% year-on-year, while pig iron production was 220 million tons (up 1.4%), cement production was 330 million tons (down 1.7%), and chemical coal consumption was 80 million tons (up 14.8%) [2]. Group 2: Coal Prices - In Q1 2025, the average price of 5500 kcal thermal coal at ports was 721 CNY/ton, down 20% year-on-year and 12% quarter-on-quarter. The average price of long-term contract thermal coal was 690 CNY/ton, down 3% year-on-year and 1% quarter-on-quarter [3]. - The pithead coal prices followed the downward trend of port coal prices, with average prices in Yulin, Datong, and Ordos down 24%, 26%, and 24% year-on-year, respectively [3]. - Coking coal prices saw a more significant decline, with the average price of coking coal in Shanxi's Lüliang at 1252 CNY/ton, down 44% year-on-year and 19% quarter-on-quarter [3]. Group 3: Sector Profitability - In Q1 2025, the total operating revenue of the coal mining industry was 284.56 billion CNY, down 17.8% year-on-year, and the net profit attributable to shareholders was 30.1 billion CNY, down 27.5% year-on-year, with an annualized return on equity of 9.6%, down 4.2 percentage points year-on-year [4]. - Among the four coal companies with a market capitalization exceeding 100 billion CNY (Shenhua, China Coal, Shaanxi Coal, and Yanzhou Coal), the net profit attributable to shareholders was 23.44 billion CNY, down 19.9% year-on-year, while the remaining 20 coal companies reported a net profit of 7.25 billion CNY, down 46.0% year-on-year, indicating a divergence in profitability [4]. Group 4: Future Outlook - In March, coal imports decreased by 6.4% year-on-year, and future coal import volumes are expected to contract [5]. - Some coal companies are already facing accounting losses, which may lead to production cuts or shutdowns [5]. - Since the beginning of the year, thermal power generation has significantly underperformed expectations, and the upcoming summer peak in electricity demand may lead to a marginal improvement in coal demand [5].

Investment Rating - The report maintains an "Accumulate" rating for the coal mining sector [5]. Core Viewpoints - The coal price decline is impacting performance, leading to increased differentiation in corporate profitability [1][2]. - The supply-demand balance is slowly improving, with prices expected to bottom out [3]. - The report suggests a defensive approach to the sector, recommending companies with high long-term contract ratios and stable profits, such as China Shenhua and China Coal Energy [3]. Summary by Sections Industry Fundamentals - In Q1 2025, China's total coal imports were 110 million tons, a year-on-year decrease of 0.9%, remaining at a high level. Notably, imports from Indonesia decreased by 6.6% to 52.59 million tons, while imports from Australia, Mongolia, and Russia increased by 3.7%, 3.1%, and 7.9% respectively [1]. - China's raw coal production reached 1.2 billion tons in Q1 2025, a year-on-year increase of 8.8%, with significant growth in Xinjiang (16.9%), Shanxi (19.8%), and Shaanxi (4.1%) [1]. - Power generation from thermal power plants fell by 4.4% year-on-year to 1.5 trillion kWh, while iron output increased by 1.4% to 220 million tons [1]. Coal Prices - In Q1 2025, the average price of spot thermal coal (5500 kcal) at ports was 721 RMB/ton, down 20% year-on-year and 12% quarter-on-quarter. The average price of long-term contract thermal coal was 690 RMB/ton, down 3% year-on-year and 1% quarter-on-quarter [2]. - The price of coking coal saw a significant decline, with the average price in Shanxi's Lüliang region dropping by 44% year-on-year to 1252 RMB/ton [2]. Sector Profitability - In Q1 2025, the total operating revenue of the coal mining industry was 284.56 billion RMB, a year-on-year decrease of 17.8%, with net profit attributable to shareholders at 30.1 billion RMB, down 27.5% [2]. - Among the four coal companies with a market capitalization exceeding 100 billion RMB, net profit was 23.44 billion RMB, down 19.9% year-on-year, while the remaining 20 companies saw a 46% decline in net profit [2]. Future Outlook - The report anticipates a gradual improvement in the supply-demand landscape, with a potential reduction in coal imports and possible production cuts or shutdowns among some coal companies due to financial losses [3]. - The report highlights that thermal power generation has been significantly below expectations since the beginning of the year, suggesting a marginal improvement in coal demand as summer electricity peaks approach [3].