Event: On April 26, 2024, the company released its 2024 quarterly report. In the first quarter of 2024, the company achieved operating income of 6.356 billion yuan, a year-on-year decrease of 40.31%; net profit to mother of 583 million yuan, a year-on-year decrease of 65.81%; net profit after deducting non-return to mother of 603 million yuan, a year-on-year decrease of 65.44%; and basic earnings per share of 0.29 yuan/share, a year-on-year decrease of 66.28%.

Comment:

Self-produced coal sales declined sharply, and gross margin declined year on year. In the first quarter of 2024, due to production-related factors such as the Spring Festival holiday and the safety supervision situation in the Shanxi region, the company's raw coal production sales declined significantly year-on-year. The company achieved raw coal production of 7,514,600 tons, a year-on-year decrease of 29.30%; the company's self-produced coal sales volume was 5.4615 million tons, a year-on-year decrease of 43.74%; the price of self-produced coal was 662.31 yuan/ton, down 17.11%; the cost of self-produced coal tons was 308.37 yuan/ton, up 2.39% year on year; gross profit margin of tons of self-produced coal was 53.44%, down 8.87 pcts year on year.

The cost and price of traded coal both fell, and sales increased year-on-year. In the first quarter of 2024, the company's trade coal sales volume was 3.833,200 tons, up 41.90% year on year; trade coal sales price was 674.09 yuan/ton, down 34.21% year on year; coal cost per ton of trade coal was 647.44 yuan/ton, down 32.64% year on year; gross profit of traded coal tons was 26.65 yuan/ton, down 58.01% year on year; gross profit margin of trade coal tons was 3.95%, down 2.24 pct year on year.

R&D expenses have increased dramatically, and sales expenses have been significantly reduced. In the first quarter of 2024, the company's cost structure showed significant changes. Among them, R&D expenses increased dramatically while sales expenses were significantly reduced, reflecting the company's strategic adjustments in optimizing the cost structure and enhancing its ability to innovate. Specifically, the company's four main expenses in the first quarter decreased by a total of 21 million yuan, a decrease of 3.61%. Among them, changes in sales expenses, management expenses, R&D expenses and financial expenses were a decrease of 67 million yuan, an increase of 0.24 million yuan, an increase of 31 million yuan, and a decrease of 190 million yuan, respectively. The year-on-year changes were -41.52%, +7.27%, +87.99%, and -15.95%, respectively.

The company's dividend rate was reduced to 30% in 2023, and the 2024-2026 dividend promise was no less than 60%. In 2023, the company plans to distribute a cash dividend of 0.65 yuan (tax included) per share, totaling 1,289 million yuan (tax included), accounting for 30.25% of net profit due to mother in 2023. Based on the stock price on March 29, 2024, the company's dividend ratio is 3.79%. According to the “2024-2026 Shareholder Return Plan” issued by the company in 2023, profits distributed in cash for each year during the planning period are not less than 60% of the distributable profits achieved in that year.

Profit forecast and rating: We expect net profit to be 3.410 billion, 3.527 billion, and 3.569 billion yuan for 2024-2026, and EPS of 1.72/1.78/1.80 yuan/share respectively; we are optimistic about the company's investment value and maintain the company's “buy” rating.

Risk factors: severe slowdown in domestic macroeconomic growth; risk of production safety; risk of fluctuations in production.