Event: The company released its results report for the first quarter of 2024. The company achieved operating income of 6.356 billion yuan in the first quarter of 2024, a year-on-year decrease of 40.31%; net profit to mother was 583 million yuan, a year-on-year decrease of 65.81%.

Coal business: Volume and price have plummeted, hampering performance.

2024Q1, the company produced 7.51 million tons of raw coal, -29.3% year-on-year, -15.0% month-on-month, commercial coal sales volume of 9.29 million tons, -25.1% YoY, -29.0% month-on-month; of these, self-produced coal sales volume was 5.46 million tons, -43.7% YoY and -30.9% month-on-month.

2024Q1, the comprehensive sales price of the company's tons of coal was 667 yuan/ton (including trade), -21.3% YoY, +5.6%; tonne coal cost 448 yuan/ton (including trade), +0.8% YoY, +5.3% month-on-month; gross profit per ton of coal 219 yuan/ton (including trade), -45.7% YoY and +6.1% month-on-month.

Diversification of coal types. The company's coal mines are located in major coal-producing areas such as Datong, Xinzhou, Linfen, Changzhi, and Jincheng. Most of the coal types are poor coal, which has characteristics such as low sulfur, low ash, and high calorific value. It is a high-quality coking coal and power coal, and is mainly sold to large steelmaking enterprises and large-scale power plants. By the end of 2023, the company's mines had total resources of 2.12 billion tons and 760 million tons of recoverable reserves.

Investment advice. We expect the company to achieve net profit of 3.9 billion yuan, 4.2 billion yuan, and 4.5 billion yuan respectively from 2024 to 2026, corresponding PE of 7.2X, 6.7X, and 6.3X.

Risk warning: Coal production and sales fell short of expectations, mine commissioning fell short of expectations, and coal prices fell sharply.