This report is read as follows:

Product structure adjustment is difficult to hedge coking price reduction, superimposed investment income declined, the performance fell in the first half of 2023; double coke downward, Q2 performance dropped sharply, slightly lower than expected; coal-coke will increase in the future.

Main points of investment:

[adjust Ta to adjust ble to _ S "um be careful ar increase y] hold rating. The company's 23H1 realized revenue of 4.46 billion yuan (- 32%) and net profit of 920 million yuan (- 56.2%), which was slightly lower than expected due to the price reduction of chemical production and the decline of investment income performance.

Although the price of coke and chemical products has been raised to a certain extent since July, the average price of Q3 is still lower than that of Q2, and the company's 25-year EPS has been lowered to 0.67,0.79,0.85 yuan (formerly 1.00,1.07,1.11) yuan, and the target price has been lowered to 5.36 yuan (formerly 6.60 yuan) according to 23 years 8xPE, which has been adjusted to the rating of "prudent increase".

Product restructuring is difficult to hedge coking price reduction, superimposed investment income declined, and the performance fell in the first half of 2023.

1) the production / sales volume of 23H1 coke is 1.43 million tons (- 21% torque 21%), and the price of coke per ton is 2228 yuan lower than the same period last year, while the cost end is that the purchase cost of clean coal is 1782 yuan per ton compared with the same period last year. Even if the unit consumption of clean coal is considered, the price drop still exceeds the cost. 2) under the coking price reduction, the company actively adjusted the product structure, increasing the output of bitumen / carbon black and other by-products, and the output was 6.6 (+ 51%) / 1.5 (+ 80%) respectively. 3) 23H1 excluding the net income of investment, the company's operating profit was-870 million yuan, a year-on-year decrease of 570 million yuan, and the loss of the company's main business intensified under the coking price reduction. 4) the net profit of participating in China Coal Huajin (49% equity) 23H1 is 4.26 billion yuan (- 26%), and the company's investment income is 1.79 billion yuan compared with the same period last year.

Double focus downward, Q2 performance dropped greatly compared with the previous month. The company's Q2 return net profit is 150 million yuan (- 85%) month-on-month-80%. The main reason is: 1) the performance of Huajin coking coal fell due to coking coal price reduction, and the company's investment income was 650 million yuan, compared with the same period last year; 2) coking continued to reduce the price, Q2 ton coke selling price 1952 yuan (month-on-month ratio-540 yuan), excluding investment income-500 million yuan, month-on-month ratio-120 million yuan.

Both coal and coke will increase in the future. The company participates in China Coal Huajin's Libi Mine of 4 million tons (anthracite) and the company plans to build 1.44 million tons of coke capacity, which is expected to continue to contribute in the future.

Risk hint: the macro-economy is lower than expected and coal prices fall faster than expected.