Summary of Coal Industry Conference Call Industry Overview - The coal industry is experiencing a significant decline in net profit, with a projected decrease of 19% in 2024, amounting to 146.5 billion yuan. The decline is more pronounced in coking coal, which is expected to drop by 46%, while thermal coal shows a smaller decline of 10% [1][8] - In Q1 2025, the overall industry performance is expected to decline by 30% year-on-year, resulting in a profit of 28.7 billion yuan. Both thermal and coking coal are experiencing declines, with thermal coal down by 25% and coking coal down by 59% [1][9] Supply and Demand Dynamics - The raw coal production in 2024 is projected to increase to 4.759 billion tons, primarily due to recovery in production during the second half of the year and increased output from Xinjiang. In Q1 2025, production is expected to grow by 8.8% year-on-year [4][6] - Despite the increase in production, there are concerns about inventory levels, which may be overstated due to coal being stockpiled at pit heads. The actual market circulation of coal may not be as high as production figures suggest [5][6] - The demand for coal has weakened significantly due to a warm winter and reduced electricity consumption, leading to a historical high of 55% of coal companies operating at a loss by March 2025 [1][7] Company Performance - Companies with a high proportion of long-term contracts, such as Shaanxi Coal and Shenhua, have experienced smaller declines in performance compared to the industry average. Electric Power Investment's performance improved due to better profits from electrolytic aluminum and increased sales [1][10] - Coking coal companies have seen an average decline of 60%, but Shanxi Coking Coal performed relatively well due to effective cost control [11] Dividend Trends - China Shenhua has the highest dividend payout ratio at 76.5%, maintaining the same amount as in 2023. Other companies like Haohua Energy and Shanxi Coal International have also increased their dividends significantly [12][13] Valuation and Market Sentiment - The price-to-earnings (P/E) ratio for thermal coal is slightly below historical averages, while the price-to-book (P/B) ratio is relatively high. In contrast, coking coal's P/E ratio is below historical averages, indicating weak market expectations for its dividend attributes [18] - The coal sector is expected to see a rebound if policy stimuli are introduced, particularly for coking coal and coke [18] Future Outlook - For Q2 2025, thermal coal is expected to perform well due to strong domestic demand, although high port inventories may lead to price weakness in early May. Companies like Shaanxi Coal and Shenhua are recommended for their strong dividend yield [19][20] - Coking coal may see a rebound if policy support is provided, but ongoing steel production restrictions could continue to suppress demand [21] Key Companies to Watch - Recommended companies include Shenhua, Zhongmei, Electric Power Investment, and Xinjie Energy, with a focus on those with stable long-term profits and growth potential [22][23]

Investment Rating - The industry investment rating is maintained as "Positive" [1] Core Viewpoints - The coal sector's overall performance in Q1 2025 showed a decline, with a total net profit of 24.12 billion yuan, down 41.5% year-on-year. Among 37 listed companies, 25 reported profits, with 23 experiencing a year-on-year decline in net profit [3] - The report suggests that the weak demand in Q1, influenced by holidays and higher temperatures, led to increased supply and falling coal prices. However, due to long-term contract pricing, the performance of thermal coal companies remained relatively stable. A rebound in coal prices is expected around mid-May [3] - The report emphasizes the importance of monitoring demand recovery and suggests that the current demand may represent the annual bottom, with a potential rebound in prices during the peak season [3] Industry Market Performance - As of April 29, the CITIC coal industry index fell by 3.69%, underperforming the CSI 300 index, which declined by 2.89%. Year-to-date, the coal sector has dropped by 13.99%, lagging behind the CSI 300 by 9.93 percentage points [10] - The coal industry's price-to-earnings ratio (TTM) is 11.5, which is relatively low compared to other sectors, ranking 27th among 30 CITIC primary industries [10] Supply and Demand Situation - In Q1 2025, the average daily sales of the top 20 coal groups decreased by 3.5% year-on-year, while national coal production increased by 8.1% to 1.2 billion tons [4][40] - The total coal consumption in China for Q1 2025 was 1.27 billion tons, a slight increase of 0.2% year-on-year, with the power sector consuming 740 million tons, down 3% [59] - The report indicates that coal prices have generally declined in Q1, with thermal coal prices at 767.6 yuan/ton, down 16.5% year-on-year [4] Investment Recommendations - The report recommends focusing on high-dividend thermal coal companies during market dips, specifically mentioning China Shenhua, Shaanxi Coal and Chemical Industry, and China Coal Energy for thermal coal, and Huabei Mining and Lu'an Environmental Energy for coking coal [3]