The Zhitong Finance App learned that Guohai Securities published a research report saying that during the energy transformation process, it is necessary to protect the smooth operation of the energy system, and that safe, stable, and low-cost coal power is definitely a better choice. In the medium to long term, the dominant position of thermal power generation in the field of power generation will not change, and its position will be further strengthened under extreme circumstances. However, coal mining procedures are complicated, construction and production cycles are long, and the cost of building new mines has risen sharply. Mainstream coal companies' will to build new mines is still very weak. The industry's production capacity has basically reached a high load, and the industry's ability to restrict supply remains unchanged. It is expected that the coal industry will maintain a tight balance in the next few years. The coal industry has high asset quality and abundant cash flow. Listed coal companies will show the five characteristics of “high profit, high cash flow, high barriers, high dividends, and high margin of safety”. It is recommended to reduce short-term fluctuations in coal prices and grasp the value attributes of the coal sector.

In the second quarter of 2024, the share of active funds holding shares in the coal industry increased to 1.61%, +0.14pct compared to the previous month (the statistical caliber is the Shenwan Tier 1 coal industry, funds are active, including common stock, partial share hybrid, and flexible allocation types), and the number of funds holding China Shenhua, Shaanxi Coal Industry, Power Investment Energy, China Shenhua HK, and Yankuang Energy ranked in the top 5. In terms of quarterly position changes, the companies that have increased the most funds were Gansu Energy, Shanxi Coking Coal, China Coal Energy HK, Jinkong Coal, and China Coal Energy; the companies that reduced the most funds positions were Yankuang Energy HK, Shaanxi Coal, Yankuang Energy, Xinji Energy, and Pingmei Co., Ltd.

By type of coal, thermal coal: the main additions this quarter were Gansu Energy, China Coal Energy HK, Jinkong Coal, China Coal Energy, China Coal Energy, China Shenhua Energy, China Shenhua, Electricity Investment Energy, and Zhengzhou Coal and Electricity; the main ones that were reduced were Hengyuan Coal, China Shenhua HK, Shanmei International, Xinji Energy, Yankuang Energy, HK; Coking coal and coke: The main ones that increased their holdings this quarter were Shanxi Coking Coal, Huaibei Mining, Lu'an Huan Energy, Yuncoal Energy, Shanxi Coking, Shanghai Energy Baotailong; positions were mainly reduced by Kailuan Co., Ltd., Panjiang Shares, Jizhong Energy, Yongtai Energy, Pingmei Co., Ltd.; anthracite : Huayang shares mainly increased their positions this quarter; the main ones that reduced their positions were orchid science and innovation.

In the process of energy transformation, it is necessary to protect the smooth operation of the energy system. Safe, stable and inexpensive coal power is undoubtedly a better choice. In the medium to long term, the dominant position of thermal power generation in the field of power generation will not change, and its position will be further strengthened in extreme circumstances. During the “14th Five-Year Plan” period, new thermal power units increased markedly year-on-year, and thermal power production still showed a continuous upward trend. At the same time, oil prices remained medium to high, and enthusiasm for the construction and production of coal chemical projects increased. Demand for coal may continue to rise in the next few years. However, the procedures for mining coal mines are complicated, the construction and production cycle is long, and the desire of mainstream coal companies to build new mines is still very weak. The industry's production capacity has basically reached a high load. After experiencing a nuclear increase in production capacity in the past two years, the space for nuclear growth has been drastically reduced, compounded by the continuous withdrawal of resource-depleted mines in regions such as the east, and the industry's ability to restrict supply remains unchanged. Guohai Securities expects that in the next few years, the coal industry will maintain a tight balance. The coal industry has high asset quality and abundant cash flow. Listed coal companies present the five characteristics of “high profit, high cash flow, high barriers, high dividends, and high margin of safety”. It is recommended to reduce short-term fluctuations in coal prices, grasp the value attributes of the coal sector, and maintain the industry's “recommendation” rating.

Current location, priority recommendations for metallurgical coal focus: Huaibei mining (undervalued regional coking coal leader, coal coking, etc.); Pingmei shares (leading coking coal in the central and southern regions with high dividends, issuing convertible bonds); Lu'an Huanneng (high share of coal in the market, high performance flexibility); Shanxi coking coal (leading coking coal industry leader, target of Shanxi state-owned enterprise reform); Thermal coal stocks suggest focusing on: China Shenhua (Changxie coal accounts for high share, steady performance and high dividends); Shaanxi coal industry (with excellent resource endowments, stable performance and high dividends) Steady and high dividends); China Coal Energy (high long-term cooperation ratio, undervalued target); Yankuang Energy (overseas coal mine assets Large-scale, highly flexible dividend); Jinkong Coal Industry (with lots of net monetary capital on account, room for improvement); Xinji Energy (continuous deepening of coal and electricity integration, stable profit and high investment value); Shanmei International (low coal mine cost, strong profitability and high dividend); Guanghui Energy (two-wheel drive for coal and gas, smooth capacity expansion logic). Coal+electrolytic aluminum suggests focusing on: Shenhuo Co., Ltd. (integrated coal and electricity, elastic standard for electrolytic aluminum). Anthracite suggests focusing on: Huayang Co., Ltd. (layout of sodium-ion batteries, resonance between old and new energy); Orchid Science and Technology (excellent resource endowment, high-quality anthracite standard).

Risk warning: 1) risk of economic growth falling short of expectations; 2) risk of policy regulation exceeding expectations; 3) risk of continuous replacement of renewable energy; 4) risk of impact of coal imports; 5) focus on the risk that the company's performance may fall short of expectations; 6) risk of measurement errors.