Summary of Conference Call for Shenhuo Co., Ltd. Company Overview - **Company**: Shenhuo Co., Ltd. - **Date**: March 24, 2026 Key Points Industry and Company Insights - **Coal Sector Risk Mitigation**: The company has transitioned the Damu Ridge and Synthetic Coal Mines from production to exit status, with a full impairment provision planned for 2025, effectively eliminating previous monthly operational losses of 30 million yuan. Future impairment pressure will focus on the Xinmi mining area [2][4]. - **2026 Production Plan**: The coal production target is set at 6.95 million tons, a reduction of 250,000 tons from the previous target of 7.2 million tons due to the shutdown of Damu Ridge and a one-month production halt at Xinzhong Coal Mine, which impacted 200,000 tons [2][6]. - **Aluminum Processing Profitability**: The aluminum processing segment is expected to maintain a monthly profit of approximately 20 million yuan [2]. Cost Trends - **Electrolytic Aluminum Costs**: Anticipated reductions in electricity prices in Yunnan by 0.01-0.02 yuan per kWh for 2026, while average anode prices are expected to drop from 4,800 yuan to 4,000 yuan per ton. Although the increase in green electricity in Xinjiang may raise costs slightly, overall costs will remain lower than in 2025 [2][10]. - **Profit Fluctuations**: The decline in Q4 2024 profits was attributed to increased coal costs (over 100 million yuan), losses from joint ventures, land occupation taxes (200 million yuan), and bonus provisions. The rise in the tax rate was due to significant impairment reducing total profits [2][5]. Dividend and Capital Expenditure - **Dividend Commitment**: The company has committed to a dividend payout ratio of no less than 30% for 2026, ensuring the absolute amount does not fall below previous levels. A stock incentive plan is in preparation [2][8]. - **Impact of Middle East Conflicts**: The ongoing conflicts have influenced commodity prices, with domestic coal prices rising due to downstream demand. The price gap between domestic and international coal has reached 200 yuan per ton [3][9]. Future Outlook - **Production Challenges**: The first quarter of 2026 has seen production challenges due to the Xinzhong Coal Mine's safety incident, which halted operations for over a month, necessitating increased production pressure in the subsequent quarters to meet the annual target [2][7]. - **Strategic Investments**: The company is exploring overseas investment opportunities, particularly in Angola, which is still in the early stages of preparation [12]. Tax and Financial Considerations - **Tax Rate Adjustments**: The tax rate for the Xinjiang company has been resolved, with no outstanding tax payment issues for 2023 or 2025. The company has adjusted its tax rate from 15% to 25% due to the lack of reapplication for high-tech enterprise status [13]. - **Operational Losses**: The Synthetic Coal Mine and Damu Ridge incurred operational losses of approximately 30 million yuan per month in 2025, totaling around 400 million yuan for the year. These losses have now been largely mitigated [14]. Aluminum Market Dynamics - **Aluminum Price Volatility**: The aluminum market is experiencing significant fluctuations due to external factors, including rumors of factory shutdowns and rising shipping costs. The profitability outlook for the alumina segment remains pessimistic due to rising costs from ore and freight [3][9]. Conclusion - Shenhuo Co., Ltd. is navigating a complex landscape in the coal and aluminum sectors, with strategic adjustments in production, cost management, and investment planning to mitigate risks and capitalize on market opportunities. The company's commitment to maintaining dividends and addressing operational challenges reflects a proactive approach to sustaining profitability and shareholder value.

Core Viewpoint - The aluminum market is experiencing a strong support due to low inventory levels and seasonal demand, with expectations of a fluctuating but generally strong trend in aluminum prices moving forward [1][6]. Group 1: Aluminum Price Trends - The main contract for Shanghai aluminum futures reached a peak of 21,205 yuan/ton on October 10, marking a nearly 11-month high, but quickly retreated due to insufficient driving forces [1]. - The aluminum price is expected to maintain a fluctuating upward trend, with resistance at 21,130 yuan/ton and support at 20,650 yuan/ton [6]. Group 2: Production and Inventory - In September, China's electrolytic aluminum production was 3.6148 million tons, a year-on-year increase of 1.14% but a month-on-month decrease of 3.18% [3]. - The aluminum water ratio increased by 1.2 percentage points to 76.3%, leading to a decrease in cast ingot production by 8.67% to 857,000 tons [3]. - As of October 13, the electrolytic aluminum inventory in major markets was 642,000 tons, a slight increase from October 9 but down 4,000 tons year-on-year [4]. Group 3: Cost Dynamics - The average fully loaded cost of domestic electrolytic aluminum in September was 16,488 yuan/ton, down 1.37% month-on-month and 6.58% year-on-year [4]. - The total cost of electrolytic aluminum is expected to decline in October, with an estimated range of 15,800 to 16,200 yuan/ton [5]. Group 4: Automotive Industry Impact - The automotive market showed positive trends in September, with production and sales reaching 3.276 million and 3.226 million units, respectively, marking month-on-month increases of 16.4% and 12.9% [5]. - New energy vehicle sales accounted for 49.7% of total new car sales in September, indicating strong growth in this segment [5]. - The automotive sector is expected to continue growing, supported by favorable policies and increased supply of new products, despite external uncertainties [6].