Core Viewpoint - The coal industry is expected to maintain a weak supply and demand balance in 2026, but coal prices may perform better than in 2025 due to policy support, leading to improved profitability and dividend expectations for listed companies [1] Industry Summary - The coal sector is projected to experience a continuation of weak supply and demand dynamics in 2026 [1] - Policy support is anticipated to positively influence coal prices, resulting in better performance compared to 2025 [1] - Profitability and dividend expectations for listed companies in the coal industry are likely to improve [1] Investment Opportunities - There may be short-term opportunities in the sector due to market style rotation and differences in industry expectations as sentiment improves [1] - Continued focus is recommended on leading companies benefiting from industry dividends, those with alpha, and potential high earnings elasticity targets [1]

Core Viewpoint - The coal industry is expected to maintain a weak supply and demand balance in 2026, but coal prices may perform better than in 2025 due to policy support, leading to improved profitability and dividend expectations for listed companies [1] Group 1: Industry Outlook - The coal industry is projected to continue experiencing a dual weakness in supply and demand in 2026 [1] - Policy support is anticipated to positively influence coal prices, resulting in better performance compared to 2025 [1] Group 2: Company Performance - Listed companies in the coal sector are expected to see improvements in profitability and dividend expectations [1] - There may be short-term opportunities in the sector due to market style rotation and differences in industry expectations as the outlook improves [1] Group 3: Investment Recommendations - Continued focus is recommended on leading companies with industry dividends, those with alpha, and targets with potential earnings elasticity [1]

Core Viewpoint - The coal industry is expected to maintain a weak supply and demand balance in 2026, but coal prices may perform better than in 2025 due to policy support, leading to improved profitability and dividend expectations for listed companies [1] Group 1: Industry Outlook - The coal industry is projected to continue a dual weakness in supply and demand in 2026 [1] - Policy support is anticipated to positively influence coal prices compared to 2025 [1] Group 2: Company Performance - Listed companies in the coal sector are expected to see improvements in profitability and dividend expectations [1] - There may be short-term opportunities in the sector due to market style rotation and differences in industry expectations [1] Group 3: Investment Recommendations - Continued focus is recommended on leading companies with industry dividends, those with alpha, and targets with potential earnings elasticity [1]

Core Viewpoint - The coal industry is expected to maintain a weak supply and demand balance in 2026, but coal prices may perform better than in 2025 due to policy support, leading to improved profitability and dividend expectations for listed companies [1] Industry Outlook - The coal sector may experience a temporary opportunity due to market style rotation or differences in industry expectations as sentiment improves [1] - Continued focus is recommended on industry leaders, companies with alpha, and those with potential earnings elasticity [1]

Summary of Coal Industry Conference Call Industry Overview - The conference call focuses on the coal industry, specifically discussing the market outlook for 2025 and 2026, as well as long-term supply constraints due to resource depletion [1][2][5]. Key Points and Arguments 2025 Market Performance - The coal industry experienced a downturn in 2025, with coal prices falling to their lowest levels in a decade. - The average price of thermal coal dropped from 850 RMB in 2024 to around 700 RMB, while coking coal prices fell from 2022 RMB to approximately 1500 RMB [2]. - The decline in prices is attributed to weak demand and increased supply, with residential electricity growth slowing and total electricity growth decreasing. The resurgence of production in Shanxi contributed to a 3% year-on-year increase in raw coal output [2]. 2026 Demand and Supply Forecast - Demand for coal is expected to improve in 2026, with a reduction in new wind and solar installations leading to an anticipated increase in thermal power generation [3][4]. - Total electricity consumption is projected to grow at a rate of 5%, equivalent to an increase of 500 billion kWh [4]. - Supply growth is expected to be limited, with a forecasted increase of only 0.6%, or 2.5 million tons, due to the potential exit of 80 million tons of illegal capacity [4]. Long-term Supply Constraints - Resource depletion is identified as a significant long-term supply constraint, with projections indicating that by 2040, the depletion rate could reach approximately 22% [5]. - Some groups may experience resource depletion rates of up to one-third of their total reserves within the next decade, highlighting severe resource over-extraction [5]. Impact of Energy Storage - Short-term impacts of energy storage on the competitiveness of thermal power are limited, but long-term projections suggest that if storage capacity reaches 30% with a 4-hour discharge time, it could correspond to an annualized power generation capacity of about 161 billion kWh [6]. - Economic viability of independent storage is constrained by diminishing price differentials as scale increases, alongside risks of subsidy reductions [6]. Investment Recommendations - Given the anticipated demand improvement and limited supply growth, the expected average price for thermal coal in 2026 is around 750 RMB, with coking coal priced between 1500-1600 RMB [3][7]. - Recommended stocks include Yancoal Energy, Power Development, and Shenhua, which are seen as having strong defensive and dividend characteristics [7][15]. Future Coal Power Demand - Coal power demand is expected to remain resilient over the next 5-10 years, despite rapid developments in wind and solar energy. The negative growth in thermal power in 2025 is attributed to short-term economic weakness rather than a long-term trend [8]. 2026 Consumption Predictions - A 1% increase in thermal coal consumption is anticipated for 2026, driven by increased coal usage in chemical processes and residential heating [9]. Global Supply Dynamics - Indonesia remains a primary source of coal imports for China, but future supply increases are limited due to rising export taxes and resource depletion issues. Other major suppliers like Australia and South Africa are also facing production plateauing [10][11]. Timing for Investment - The best time to invest in recommended companies is expected to be in the second quarter of the following year, particularly if spot prices fall below 700 RMB/ton, presenting a cost-effective opportunity [16]. Additional Important Insights - The focus on the steel industry and its demand for coking coal is crucial, as any slowdown in real estate investment could impact steel production negatively. Conversely, improvements in overseas economies could boost manufacturing and export, thereby increasing demand for steel and coking coal [13][14].

Core Insights - The coal industry is rated as "Outperform" with a maintained rating, indicating a positive outlook for investment opportunities in the sector [1] - The report highlights an improvement in market conditions, suggesting a gradual recovery in coal prices and overall industry performance [2] Investment Highlights - The coal price is expected to decline initially in 2025 before rebounding, with the coal sector projected to yield positive absolute returns, albeit underperforming the CSI 300 index [5] - Domestic supply is anticipated to decrease in 2026 due to production restrictions, with varying impacts across provinces: Shanxi is expected to reduce washed coal output, Inner Mongolia's production is at its peak, Shaanxi faces capacity exit pressures, and Xinjiang has potential for increased output [5] - Import coal volumes are projected to decline in 2025, with a year-on-year decrease of 10.9% from January to October. A slight recovery is expected in 2026, particularly in thermal coal from Mongolia, while Australian and American imports are anticipated to decrease [5] - Electricity demand is shifting, with significant increases in hydropower and wind energy, leading to a reduction in thermal power generation in 2025. However, a recovery in thermal power demand is expected in 2026 [5] Supply and Demand Analysis - The report indicates that the supply of coal is likely to decline in 2026, with marginal improvements in thermal power and stabilization in non-electric demand, contributing to an overall improvement in coal market conditions [6] - The average price of thermal coal is expected to rise to 770 RMB in 2026, while coking coal prices are anticipated to stabilize at the bottom, with demand improvements being a key factor [6] Investment Recommendations - Investors are advised to prioritize leading companies with strong resource endowments, effective cost control, and high long-term contract ratios, such as China Shenhua, China Coal Energy, and Shaanxi Coal and Chemical Industry [6] - Companies that are expected to benefit from improving coal prices include Yanzhou Coal Mining, Jinneng Holding, Huayang Co., Shanxi Coal International, and Guanghui Energy [6] - Coking coal companies are recommended due to their strong resource scarcity and potential benefits from counter-cyclical and cross-cyclical adjustment policies, with a focus on Huaibei Mining, Shanxi Coking Coal, Pingmei Shenma, and Lu'an Environmental Energy [6] Policy Impact - The report discusses the effectiveness of supply-side reforms in stabilizing coal prices, indicating that recent production restrictions have positively influenced market conditions [21][27] - The relationship between coal prices and the Producer Price Index (PPI) is emphasized, with stable coal prices being crucial for stabilizing PPI, which has been under pressure for an extended period [30][42]

Summary of Coal Industry Conference Call Industry Overview - The coal industry is experiencing a price adjustment, with domestic thermal coal prices around 780 RMB/ton in Shaanxi and 820 RMB/ton in Shanxi and Inner Mongolia, indicating a narrowing price gap with port prices [1][3] - Australian coal prices have slightly increased, while Indonesian coal prices have slightly decreased, with import advantages remaining but significant increases unlikely [1][3] - Coal inventory at northern ports has risen slightly but remains below levels from the past two years, easing winter price increase pressures [1][4] Key Market Insights - The coking coal market is stable with significant futures price increases, driven by supply tightness due to production halts in the Ulanqab region and reduced imports from Mongolia [1][5] - The coal sector's stock performance has declined due to some companies reporting lower-than-expected Q3 results and market style changes, despite a generally upward trend in fundamentals [1][6] - Q3 average thermal coal prices saw limited increases, with some companies experiencing profit growth constraints due to limited price increases and sales strategy adjustments [1][6][7] Financial Performance - The average profit per ton of coal in the industry improved slightly in Q3, reaching 65 RMB, up 13% from Q2, but still down approximately 52% year-on-year [1][9] - The overall net profit for the coal sector decreased by nearly 30% year-on-year to approximately 31.2 billion RMB, but Q3 net profit increased by 22% quarter-on-quarter, marking the best performance of the year [1][10] - Capital expenditures in the coal industry grew by 11% year-on-year, with debt levels reaching a new high of 4.83 trillion RMB, while the debt-to-asset ratio remained stable around 60% [1][11] Investment Recommendations - For Q4, the focus should be on elastic stocks, with a positive outlook for potential price increases in thermal coal and coking coal due to seasonal demand and supply constraints [2][13] - Recommended companies with high elasticity include Lu'an Huanneng, Yanzhou Coal, and China Coal Energy, while long-term investments should consider China Shenhua, China Coal Energy, and Shaanxi Coal and Chemical Industry [2][17] - Yanzhou Coal is highlighted for its high elasticity in the thermal coal market, while China Coal Energy has a stable base with potential for price elasticity in coking coal [14][15] Long-term Strategy - The coal industry is expected to see a gradual upward shift in its central tendency, making it suitable for long-term investments, particularly in companies with high dividend yields and stable performance [17][18] - Companies like China Shenhua, China Energy, and Electric Power Investment Energy are recommended for their robust dividend potential and stable earnings [17]

Core Viewpoints - The coal industry is expected to see a rebound in the fourth quarter of 2025, driven by a potential increase in coal prices and improved profitability for coal companies as supply constraints become evident [2][11][18]. Group 1: PE and PB Analysis - The coal sector has experienced a downward trend in both PE and PB after a period of rapid growth, with significant differentiation observed during two periods: 2014-2017 and mid-2024 to present [2][11]. - The current PE is at approximately the 65th percentile since 2005, while the PB is at about the 27th percentile, indicating a cyclical low for the sector [17][18]. Group 2: Supply Dynamics - Coal production in July and August 2025 saw a year-on-year decrease due to rainfall and regulatory checks, with an expected slight decline in total production for the year [3][37]. - The total coal production for 2025 is projected to be around 4.71 billion tons, reflecting a year-on-year decrease of 1.1% [3][37]. Group 3: Demand Outlook - Anticipated cold winter conditions are expected to boost demand in the winter months, with electricity consumption projected to grow by 5-6% year-on-year in 2025 [4]. - Chemical coal demand remains robust, with significant year-on-year increases in production for coal-based PVC, ethylene glycol, and methanol [4]. Group 4: Inventory and Price Trends - Inventory pressures across various segments have eased compared to the first half of the year, supporting a rebound in coal prices [5]. - The expectation of supply contraction is likely to elevate the price floor for coal, with seasonal demand potentially opening up upward price movement [5]. Group 5: Investment Recommendations - The report recommends several stocks based on their potential for rebound and growth, including Yanzhou Coal Mining Company, Jinneng Holding, and China Shenhua Energy [5].

Supply: Marginal Increment Significantly Reduced - Domestic coal production from January to May increased by approximately 130 million tons year-on-year, while imports decreased by about 16 million tons, indicating an overall increase in supply [3][7] - The domestic raw coal production reached 1.99 billion tons from January to May, reflecting a year-on-year increase of 6%. However, the growth rate is expected to narrow in the second half of the year, with an estimated total production of around 4.85 billion tons for 2025, representing a year-on-year increase of 9 million tons (2%) [3][9] - The decrease in imports is attributed to weak demand, high inventory levels, and diminishing price advantages of imported coal. For the first five months of 2025, coal imports totaled 19 million tons, a year-on-year decrease of approximately 16 million tons (8%) [3][64] Demand: Short-term Improvement Expected, Medium-term Resilience Visible - National commodity coal consumption from January to May reached 2.05 billion tons, showing a slight year-on-year increase of 0.1 billion tons (0.5%). The demand is expected to improve in the second half of the year as the consumption peak season approaches [3][4] - In the thermal power sector, the demand is under pressure due to slowing electricity growth and competition from renewable energy. However, the demand for thermal power is expected to rebound in the second half of the year [3][4] - Non-electric demand, particularly from the chemical sector, remains strong, with significant year-on-year growth in coal-to-PVC, coal-to-ethylene glycol, and coal-to-methanol production [3][4] Inventory: High Port Inventory Declining, De-stocking Remains Focus - Port inventories are currently at high levels but are expected to decline as demand improves in the peak consumption season. The focus will remain on de-stocking [4] Price: Thermal Coal Prices at Bottom, Coking Coal Prices Showing Stages of Rebound - The average market price of Qinhuangdao Q5500 thermal coal fell by approximately 199 yuan/ton in the first half of 2025, a year-on-year decrease of 23%. However, there is potential for price rebound as supply-demand dynamics improve [3][57] Investment Recommendations: High Dividend Value Still Exists, Stage Game Elasticity - The report suggests that despite the downward pressure on coal prices, there is still potential for a rebound in the second half of the year. The resilience of coal demand is viewed positively in the medium term [3][4] - Key investment targets include stable-performing coal companies such as China Shenhua, China Coal Energy, and Shaanxi Coal and Chemical Industry, as well as elastic stocks like Electric Power Investment and Jinko Coal Industry [3][4]

Core Insights - The coal industry is experiencing significant supply contraction due to falling prices, with over 53.64% of coal companies reporting losses as of April 2025, the highest level since 2018 [1][20][22] - Electricity demand is expected to rebound with the onset of summer, as average daily power generation showed a year-on-year increase of 3.32% in mid-May 2025, despite a 14.37% decline in hydroelectric power generation [1][59] - A strong expectation for a rebound in thermal coal prices is anticipated as demand increases with rising temperatures, potentially peaking during the July-August consumption high [2][59] Supply and Demand Analysis - The coal supply has contracted significantly, with April 2025 coal production down 11.64% month-on-month, primarily due to reductions in output from regions like Xinjiang and Inner Mongolia [20][59] - The decline in coal imports, which fell by 16.4% year-on-year in April 2025, is expected to support the domestic market [24][26] - The overall supply reduction is greater than the demand decrease, indicating that coal prices are currently in an oversold state [20][21] Investment Recommendations - Recommended stocks include industry leaders with stable performance such as China Shenhua, Shaanxi Coal, and China Coal Energy, as well as growth-oriented companies like Jinkong Coal and Shanmei International [3] - The report highlights the defensive value of leading companies with low debt and high cash flow, which are expected to benefit from market confidence and potential asset injections [2][3] Price Outlook - Thermal coal prices are expected to rebound due to seasonal demand increases and supply tightening, with a peak anticipated during the summer consumption high [2][59] - Coking coal prices are projected to stabilize, supported by a bottoming out of thermal coal prices and potential increases in export demand due to easing trade tensions [2][60]