Core Viewpoint - The company reported a decline in net profit for the first half of 2025, primarily due to falling coal prices, while the aluminum segment showed signs of profit recovery driven by a decrease in alumina prices [1][2] Financial Performance - In the first half of 2025, the company achieved operating revenue of 20.428 billion yuan, a year-on-year increase of 12.12% - The net profit attributable to shareholders was 1.904 billion yuan, a year-on-year decrease of 16.62% - The non-recurring net profit was 2.01 billion yuan, down 6.79% year-on-year - In Q2, total revenue reached 10.797 billion yuan, up 7.99% year-on-year and 12.09% quarter-on-quarter - Q2 net profit attributable to shareholders was 1.196 billion yuan, a slight increase of 0.22% year-on-year and a significant increase of 68.89% quarter-on-quarter [1] Price Trends - In the first half of 2025, the average price of domestic electrolytic aluminum increased by 2.7%, while alumina prices fell by 2.1% - The average prices of various coal types saw significant declines, with Yuncheng smokeless coal down 23%, thin coal down 31%, and Pingdingshan thermal coal down 17% year-on-year - In Q2, the average price of domestic electrolytic aluminum was 20,196 yuan/ton, down 1.7% year-on-year and 1.2% quarter-on-quarter; alumina averaged 3,071 yuan/ton, down 16% year-on-year and 19% quarter-on-quarter [2] Cost Management - The company reduced total selling, administrative, research and development, and financial expenses to 975 million yuan, a year-on-year decrease of 12% - The expense ratio was 4.8%, down 1.3 percentage points year-on-year, mainly due to reductions in research and selling expenses [3] Production and Sales - In the first half of 2025, the company produced 871,100 tons of aluminum products, a 16% increase, and sold 871,400 tons, also a 16% increase - Coal production reached 3.7078 million tons, a 15% increase, with sales of 3.7275 million tons, an 18% increase - Production of carbon products decreased by 24% to 175,300 tons, while sales fell by 19% to 190,400 tons - Aluminum foil production increased by 28% to 53,000 tons, with sales up 21% to 49,800 tons [4] Investment Insights - The company has strong coal quality and production capacity, with significant earnings elasticity from rising coal prices - Based on projected coal sales of 6.7 million tons in 2024, a 100 yuan/ton price change could impact coal revenue by approximately 600 million yuan - Expected net profits for 2025-2027 are 5.02 billion yuan, 5.85 billion yuan, and 6.66 billion yuan, reflecting year-on-year growth of 16.6%, 16.5%, and 13.8% respectively - The company is valued using a segment valuation method, with target prices set at 22.9 yuan based on a 13x PE for coal and a 10x PE for electrolytic aluminum [5]

Core Viewpoint - Shenhuo Co., Ltd. reported a decline in net profit for the first half of 2025, primarily due to a significant drop in coal prices, despite a year-on-year increase in revenue [2][3]. Financial Performance - The company achieved a revenue of 20.428 billion yuan in the first half of 2025, representing a year-on-year growth of 12.12% [2]. - The net profit attributable to shareholders was 1.904 billion yuan, showing a year-on-year decrease of 16.62% [2]. - The coal mining business revenue decreased by 18.99% to 2.887 billion yuan, while the non-ferrous metal business revenue increased by 20.79% to 14.182 billion yuan [3]. Production and Sales - Shenhuo Co., Ltd. maintained a balance between production and sales for its main products in the first half of 2025, with aluminum production at 871,100 tons and sales at 871,400 tons, both achieving around 51% of the annual plan [3]. - Coal production was 3.7078 million tons with sales of 3.7275 million tons, also around 51% of the annual plan [3]. - The company’s coal reserves were reported at 1.308 billion tons, with a recoverable reserve of 605 million tons [3]. Share Buyback - The board approved a share buyback plan on December 30, 2024, with a budget of 250 million to 450 million yuan, at a price not exceeding 20 yuan per share [4]. - As of June 30, 2025, the company had repurchased 15.4204 million shares, accounting for 0.686% of the total share capital, with a total expenditure of 255 million yuan [4]. Business Developments - Shenhuo Co., Ltd. has no current plans for overseas expansion due to high investment risks and long payback periods [5][6]. - The company invested 186 million yuan in Anhui Xiangbang Composite Materials Co., acquiring a 35% stake, aiming to enhance the value and technology of aluminum processing products [6]. Market Outlook - The coal market is expected to experience a supply-demand balance and potential price stabilization in the second half of 2025, driven by national growth policies [6]. - The company anticipates that aluminum prices will remain high in the second half of 2025 due to government initiatives in key industries [6]. - The aluminum foil industry is facing increased competition, which is impacting profit margins for the company’s aluminum processing business [6].

Investment Rating - The investment rating for the company is "Outperform the Market" [4][26]. Core Views - The company is expected to experience a decline in net profit by 38% in 2024, with revenue projected at 322.1 billion yuan, a decrease of 6.5% year-on-year. However, the company maintains a strong cash flow with operating cash flow increasing by 9.6% to 27.74 billion yuan [5][6]. - The company plans to distribute a total dividend of 2.15 billion yuan in the second half of 2024, which, along with previously distributed cash dividends and share buybacks, will total 5.31 billion yuan, representing 72.1% of the net profit attributable to shareholders [5][6]. - The company is focusing on product structure upgrades and maintaining stable operations despite industry pressures, with steel sales expected to remain flat at 51.6 million tons in 2024 [6][26]. Financial Performance and Projections - For 2024, the company is projected to achieve revenue of 322.1 billion yuan and a net profit of 7.36 billion yuan, with a significant recovery expected in 2025, where net profit is forecasted to rise to 9.75 billion yuan, reflecting a year-on-year growth of 32.4% [3][26]. - The company plans to produce 48.79 million tons of iron and 52.61 million tons of steel in 2025, with total revenue expected to reach 312 billion yuan [6][25]. - The earnings per share (EPS) is projected to be 0.44 yuan in 2025, with a corresponding price-to-earnings (PE) ratio of 15.6x [26][27].