The company announced the 2024 H1 results. The company 24H1 achieved operating income of 5.985 billion yuan, a year-on-year decrease of 4.40%; realized net profit to mother of 1.176 billion yuan, a year-on-year decrease of 10.11%. 2024Q2 achieved net profit of 0.578 billion yuan, a year-on-year decrease of 19.03%; operating income of 2.927 billion yuan, a year-on-year decrease of 12.99%.

Coal: The decline in production and price in Q2 dragged down performance, and the proportion of foreign sales increased. In 2024 H1, the company's coal sector (including internal) achieved revenue of 5.1 billion yuan, -6.2% year over year; gross profit (including internal) of 2.05 billion yuan, -3.6% year over year. 24Q2's coal sector (including internal) achieved revenue of 2.5 billion yuan, -12.9% year-on-month, and -2.5% month-on-month; gross profit (including internal) of 1.02 billion yuan, -8.6% year-on-year, and -1.6% month-on-month. Specifically:

2024H1 coal production was 10.38 million tons, -7.7% year on year, commercial coal sales volume was 9.1 million tons, -10.2% year on year; of these, external sales volume was 7.12 million tons, -14.0% year on year, accounting for 78.2% of external sales, -3.4 pct year on year.

2024Q2 coal production was 5.36 million tons, -5.9% YoY, +7.0% month-on-month, commercial coal sales 4.58 million tons, -14.5% YoY, +1.2% month-on-month; of these, external sales volume was 3.62 million tons, -18.7% YoY, +3.2% month-on-month, accounting for 79.0% of foreign sales, +2.0pct month-on-month.

The comprehensive sales price of 2024H1 tons of coal was 564 yuan/ton, +4.5%; the comprehensive cost of a ton of coal was 339 yuan/ton, +2.7%; the comprehensive gross profit of a ton of coal was 225 yuan/ton, +7.4% year-on-year. The comprehensive sales price of 2024Q2 tons of coal was 554 yuan/ton, +1.9% year on month, -3.7% month on month; the comprehensive cost of tons of coal was 332 yuan/ton, -1.2% year on month, -4.3% month on month; comprehensive gross profit per ton of coal was 222 yuan/ton, +6.9% year on month, -2.8% month on month.

Electricity: The decline in production and sales in Q2 dragged down performance, and the planned installation layout has already started.

2024H1 generated 4.61 billion kilowatt-hours, +12.4% year over year; feed-in power 4.35 billion kilowatt-hours, +12.7% year over year; average feed-in price was 0.41 yuan/kWh, +1.3% year over year. 2024Q2 generated 2.15 billion kilowatt-hours, -0.7% year over month, -12.8%; feed-in power 2.02 billion kilowatt-hours, -1.0% year on month, -13.3% month on month; average feed-in tariff was 0.41 yuan/kWh, +1.3% year on month, +0.8% month on month.

The company's coal power business has broad room for growth. Projects such as Shangrao Power Plant, Chuzhou Power Plant, and Lu'an Power Plant are still being prepared for construction, with a total installed capacity of 7,250MW. 2024Q1, the company's holding subsidiary, officially began construction of the new 2×1000MW supercritical secondary reheated coal-fired generator set in Shangrao on March 26, 2024; China Coal Xinji (Chuzhou) Power Generation Co., Ltd. construction of the new 2×660MW supercritical secondary reheated coal-fired generator set officially began on March 28, 2024.

The semi-annual report announced the relevant coal and electricity asset calculation plans.

According to the relevant provisions of the notice issued by the Ministry of Finance and the Ministry of Emergency Response on the “Administrative Measures on the Withdrawal and Use of Production Safety Costs by Enterprises”, and taking into account the actual situation of the company, the Xinji No. 1 Mine, Xinji Mine, and Liuzhuang Mine are calculated at 50 yuan/ton, while the other mines remain unchanged.

The company Lixin Power Generation determines the current year's accrued withdrawal amount based on the previous year's operating income, and uses an average monthly withdrawal method. The extraction standards are as follows: the portion not exceeding 10 million yuan is extracted at 3%; the portion of 10 million yuan to 0.1 billion yuan is extracted at 1.5%; the portion of 0.1 billion yuan to 1 billion yuan is extracted according to 1%; the portion of 1 billion yuan to 5 billion yuan is extracted at 0.8%; and all maintenance fees are extracted according to raw coal production at 11 yuan/ton.

Investment advice. We expect the company to achieve net profit of 2.18 billion yuan, 2.48 billion yuan, and 2.89 billion yuan respectively in 2024-2026, corresponding PE of 10.1, 8.9, and 7.6. Maintain a “buy” rating.

Risk warning: Coal prices have collapsed, feed-in tariffs have been lowered, and the commissioning of installed equipment falls short of expectations.