Event: The company released financial results for the first quarter of 2023 and 2024. In 2023, the company achieved total revenue of 43.137 billion yuan, -20.6%; net profit of 7.922 billion yuan, -44.1%; net profit after deducting non-return of 7.889 billion yuan, -45.11%; in a single quarter, Q4 achieved operating income of 10.124 billion yuan, -29.3% YoY, -9.0% month-on-month; net profit to mother 652 million yuan, -86.7% YoY, -67% month-on-month; net profit without return to mother of 647 million yuan, -87.4% YoY, -67.2% YoY. In the first quarter of 2024, the company achieved total operating income of 8.659 billion yuan, -27.2% year-on-month, -14.5%; net profit to mother of 1,288 billion yuan, -61.9% year-on-year, +97.5% month-on-month; net profit without return to mother of 1,285 billion yuan, -61.7% year-on-year, +98.6% month-on-month.

The volume and price of coal increased and decreased, putting pressure on coke performance. In terms of coal business, in 2023, the company achieved raw coal production/commercial coal sales of 6046/54.98 million tons, +6.3%/+3.9%, commercial coal tonnes sold for 728 yuan/ton, -21.8% YoY, the cost of a ton of coal was 348 yuan/ton, -3.3% YoY, of which sales volume of blended/injected coal was 2941/21.62 million tons, -0.9%/+6.0%; the price of mixed coal/jet coal tonnes was 562/990 yuan/ton, -18./ -26.7%;/The cost of injecting a ton of coal is 265/ 489 yuan/ton, -2%/-4.3% YoY. On a quarterly basis, Q4's raw coal production/commercial coal sales volume was 1584/14.57 million tons, +19.9%/+1.9% month-on-month, +5.04%/+9.7% month-on-month, the price of commercial coal tonnes was 651 yuan/ton, -9.5% month-on-month, and the cost of a ton of coal was 360 yuan/ton, +1.2% month-on-month, of which mixed coal/jet coal sales volume was 738/613 yuan/ton, +8.9%/-10.5% YoY, +10.6%/+8% month-on-month. In terms of the coke business, due to the decline in real estate sentiment in 2023, the black industry chain showed weak performance. The company's coking sector experienced large losses. The annual sales volume was 1.24 million tons, -27.3% year-on-year, and the price of a ton of coke was 2,260 yuan/ton, or 19.2% year-on-year.

Prices picked up in 24Q1, and high dividends highlighted the value of the investment. Affected by safety supervision and other factors in the first quarter of 2024, production and sales declined, achieving raw coal production/commercial coal sales of 1324/11.81 million tons, -9.93%/-7.08%; -16.4%/-18.9% month-on-month, 689 yuan/ton coal revenue, -20.7% YoY, +5.9% month-on-month, tonne coal cost 378 yuan tons, +7.6% YoY, +5.0% month-on-month, of which sales volume of blended coal/jet coal was 655/ 4.59 million tons, -10.2%/-0.2%, and -11.2% month-on-month/-25.1%. Looking forward to the future, coking coal stocks in steel mills in March 2024 are close to the level of the second and third quarters of last year. Steady economic recovery and large-scale equipment upgrades are expected to drive demand for steel mills to replenish stocks, and coking coal prices are supported. In 2023, the company plans to pay a dividend of 4.753 billion, with a dividend ratio of 60%, corresponding to a dividend rate of 6.6% (4/18 closing price). The high dividend highlights the investment value.

Profit forecast: We expect the company's 2024-2026 net profit to be 73.3/77.7/7.98 billion yuan, EPS 2.45/2.60/2.67 yuan respectively, and PE 9.79/9.24/9.00 times, respectively, maintaining a “buy” rating.

Risk warning: Domestic economic recovery falls short of expectations; coal prices have declined beyond expectations; infrastructure fixed asset investment funds have fallen short of expectations