Introduction to this report:

The main coal industry price has declined steadily, costs have been optimized, and performance has declined year on year; volume and price have all declined, Q2 performance has declined; and there has been an active transition to green electricity.

Key points of investment:

Lower profit forecasts and target prices to maintain holdings growth ratings. 2023H1 achieved revenue of 5.9 billion dollars (-13%), net income of 1.2 billion dollars (-24%), coal prices fell, and performance declined. The company's EPS from 2023 to 2025 was lowered to 2.48, 3.14, and 3.90 (originally 3.68, 3.89, 4.00) yuan, and the company's target price was lowered to 17.36 (originally 23.17) yuan according to the industry average of 7xPE in 2023 to 17.36 (previously 23.17) yuan to maintain the increase in holdings rating.

The main coal prices fell steadily and incrementally, costs were optimized, and performance declined year on year. The company's 23H1 raw coal output was 4.23 million tons (+1%), and commercial coal sales volume was 3.29 million tons (-1%). Overall production and operation were basically the same year on year.

The price of tonnes of coal sold for 1190 yuan (-251 yuan). Due to the fall in market coal prices in the first half of the year and the increase in the share of cheap Jiang coal, the company's coal price fell. The cost of tonnes of coal during the same period was 557 yuan (+26 yuan), and the price drop was steady. The 23H1 coal business contributed 3.9 billion yuan (-19%) in revenue and 2.1 billion yuan (-31%) in gross profit. 23H1 The total cost of the four items was 350 million yuan, compared to -80 million yuan over the previous year. During the period when coal prices fell, the company insisted on controlling fees and increasing efficiency.

Both volume and price have declined, and Q2 performance has declined. Company Q2 achieved net profit of 340 million yuan (-55%) of -60% month-on-month, mainly due to: 1) Tons of coal sold at 1,078 yuan/ton, -406 yuan, mainly due to the company's market-based sales of coking coal. Refer to Wind, Xuzhou 1/3, the average price of the board price of Q2, 1,758 yuan/ton, down 382 yuan per ton; 2) The cost of tonnes of coal is 606 yuan/ton, +72 yuan, or because the proportion of coking coal in the company's Q2 has declined. Shareholders' profit and loss Q2/Q1 are respectively 0.3/10 million yuan, while minority shareholders' profit and loss was mainly contributed by Tianshan Coal and Power, which holds 51% of the shares; 3) Commercial coal sales volume of 1,60,000 tons was -170,000 tons over the same period, which may be affected by Tianshan Coal and Power's reduction.

Actively transform green electricity. The 202MW of the first phase of the new energy project of the company's Jiangsu base headquarters has been completed and connected to the grid for power generation, and the remaining 61 MW is expected to be completed and put into operation in 2023.

Risk warning: The macroeconomic economy fell short of expectations; costs rose more than expected; coal prices fell beyond expectations.