Performance is expected to increase and growth can be expected. Take more measures to show confidence, maintain that the “increase in holdings” rating companies issue pre-performance announcements for the 2024 semi-year, and H1's operations will continue to improve in 2024. In addition, recently, the company also issued a number of announcements, such as the 2024 “Improving Quality, Efficiency and Reward” action plan, and the completion of the implementation of the sixth share increase plan for core management, demonstrating the firm confidence of the company and management in the company's fundamentals and future development prospects. We believe that the company will continue to respond to market concerns. At the current bottom of the company's stock price, it will effectively boost investor confidence, combine the implementation of the company's relevant management plans and the commissioning of projects under construction to deliver results, and the valuation is expected to reverse the bottom. We maintain our 2024-2025 profit forecast and add the 2026 profit forecast. We expect to achieve net profit of 24.1/26.0/2.71 billion yuan in 2024-2026, +6.4%/+8.0%/+4.0% year over year; EPS is 0.11/0.12/0.12 yuan, corresponding to the current PE share price of 10.7/9.9/9.5 times. The company's complementary coal and electricity business model helps increase performance. In the construction of new coal mines, the transformation and development of energy storage is worth looking forward to, and maintaining the “gain” rating.

In 2024, H1 bucked the trend, and the Haizetan Coal Mine consolidated its high growth forecast for 2024 H1: the yield level of the coal business increased, coal production remained stable, and high-quality coking coal products maintained good profit margins; the cash out rate of Changxie Coal in the power business increased year-on-year, and the company adopted measures such as grabbing power, more heating, and improving peak shifting capacity, and operating efficiency continued to improve. Combined with the complementary operating advantages of the coal and power business, the company's performance continues to maintain a good growth trend. The company expects H1 to achieve net profit of 11.6 to 1.26 billion yuan in 2024, an increase of 14.54% to 24.41% over the previous year; to achieve net profit without return to mother of 11.1 to 1.21 billion yuan, an increase of 10.46% to 20.41% over the previous year. In the 2024 Q2 order, the company expects to achieve net profit of 6.9 to 790 million yuan, an increase of 48.60% to 70.03% over the previous month; net profit without deduction of 11.1 to 1.21 billion yuan, an increase of 35.91% to 57.16% over the previous month. The Haizetan coal mine is expected to contribute to long-term profits. The company has comprehensively accelerated the construction of the Haizetan coal mine. By the end of May 2024, all four boreholes had been excavated and coal unveiled. The first phase of the project ended one month early, and construction of the second phase began in June. The company expects the Haizetan project to release coal in Q3 2026 and reach production in 2027. Based on the average coal price in the 2023 market, it can add about 9 billion yuan in revenue, about 4.4 billion yuan in net profit, and about 5.1 billion yuan in net cash flow. Based on the stock business in 2023, the company's operating income will reach 39.120 billion yuan, net profit of 6.905 billion yuan, and net operating cash flow of 12.125 billion yuan.

Take more measures to enhance intrinsic value, reverse the predicament and continuously enhance shareholder returns (1) Focus on the integration of coal and electricity to reduce costs, increase efficiency, and maintain growth. Against the backdrop of widespread pressure on the industry, the company guarantees the profitability of the coal business by improving yield order entry and washing efficiency, and enhances the profitability of the power business through various effective measures such as grabbing electricity and heating, improving the cash flow of Changxie coal, and participating in peak shifting auxiliary services to ensure steady growth in 2024. (2) Accelerate the construction of Haizetan to ensure a significant increase in performance in 2027. The Haizetan Coal Mine is a key project monitored and supervised by the National Development and Reform Commission. The company expects future production capacity to increase to 10 million tons/year. After production, it is expected to achieve the medium-term development target of a net profit increase of more than 170% compared to 2023. (3) Actively promote the construction of energy storage projects to achieve new quality productivity breakthroughs. While developing the main coal power industry, the company is actively developing the entire vanadium liquid flow battery industry chain, and strives to form an energy storage industry in 2025, with a market share of more than 30% in 2030, becoming a benchmark enterprise for the development of the entire energy storage industry chain. (4) Implement a dividend mechanism to ensure long-term returns for investors and creditors. By the end of 2023, the company's interest-bearing debt was 41.1 billion yuan, a sharp decrease from before the restructuring. The financial situation was further optimized, and the difficult situation was successfully reversed. The company attaches great importance to reasonable shareholders' returns, and will return investors through cash dividends and share repurchases on the basis of timely repayment of maturing debts, safeguarding the construction of key projects, and ensuring the company's continuous and stable development, so as to achieve long-term returns to investors.

Risk warning: Coal prices fell beyond expectations; coal production fell short of expectations; energy storage transformation fell short of expectations.