Event: The company publishes its 2024 mid-year report. In the first half of 2024, the company achieved operating income of 5.985 billion yuan, -4.40% year on year; net profit to mother of 1.176 billion yuan, -10.11% year over year; net profit of 1.138 billion yuan after deduction, -11.57% year on year.

Coal business: coal quality improvement & cost control, gross profit per ton of coal increased year-on-year. 1) Production and sales volume: In the first half of 2024, the company achieved 10.379 million tons of raw coal, -7.65%; commercial coal production of 9.3602 million tons, -4.82% year-on-year; and sales of commercial coal of 9.1036 million tons, or -10.24% year-on-year. Among them, 24Q2 achieved raw coal production of 5.3647 million tons, or -5.9%; commercial coal production of 4.6658 million tons, or -7.9% year-on-year; and sales of commercial coal of 4.5797 million tons, or -14.5% year-on-year. 2) Price & cost: In the first half of 2024, the comprehensive sales price of commercial coal (tax included) was 564.2 yuan/ton, +4.53% year over year. The price without tax increased by 24.46 yuan/ton; the unit cost of commercial coal was 339.0 yuan/ton, +2.72% year over year. Among them, the comprehensive sales price of 24Q2 commercial coal was 553.6 yuan/ton, +1.89% year over year; the comprehensive cost was 331.6 yuan/ton, -1.22% year over year. 3) Gross profit: The gross profit per unit of commercial coal in the first half of 2024 was 225.2 yuan/ton, +7.38%; the gross profit scale of the coal business was 2.05 billion yuan, with a gross profit margin of 40%. Among them, the gross profit per unit of commercial coal in 24Q2 was 222.1 yuan/ton, +6.91% year-on-year, and is still high.

Electricity business: Volume and price have risen sharply, and profits are steady. 1) Electricity sales: In the first half of 2024, the company achieved 4.61 billion kilowatt-hours of power generation, +12.41% year-on-year; feed-in electricity of 4.353 billion kilowatt-hours, +12.66% year-on-year. Among them, 24Q2 achieved 2.148 billion kilowatt-hours of power generation, -0.7% year-on-year; feed-in power of 2.021 billion kilowatt-hours, or -1.0% year-on-year. 2) In terms of electricity prices: In the first half of 2024, the average feed-in tariff for the company's electricity business (excluding tax, same below) was 0.4115 yuan/kilowatt-hour, +1.28% year-on-year; the electricity business achieved revenue of 1.791 billion yuan, +14.1% year-on-year.

3) The Panji Power Plant benefits from stable unit performance, reliable coal quality from the coal source, and the unit has characteristics such as strong peak capacity and flexible adjustment. The average acquisition rate of capacity electricity prices from January to May 2024 was 99.79%, and implementation was higher than the provincial average.

The long-term increase in power projects is considerable, and coal-power collaboration is expected to deepen. Currently, the company holds the first phase of the Panji Power Plant (2*1 million kilowatts), wholly-owned two low calorific value power plants, the Xinji 1 Power Plant and the Xinji 2 Power Plant. The holding installed capacity is 2.024 million kilowatts, and is also participating in the Xuancheng Power Plant (1*63+1*0.66 million kilowatts). According to our analysis, the total installed capacity of the company's future construction and planned projects will reach 5960 MW, and the installed equity capacity is 3874 MW, and the power business can be expected to grow.

According to the Investor Q&A Platform, the second phase of the Panji Power Plant began construction in November 2022, and it is expected that both machines will be in operation in October 2024. The company's new thermal power project will mainly supply self-produced coal, supplemented by Northern Changxie coal and imported coal. After the new project is put into operation, the degree of coal-power collaboration is expected to increase further. According to our estimates, the proportion of coal consumption in power plants covered by self-produced coal in 2025-2027 was 52%, 85%, and 100%, respectively.

Profit forecasting and investment ratings. Considering the scale of the company's thermal power projects under construction and the room for improvement in coal-power collaboration, the company's profit growth and stability are expected to be further consolidated. We maintain our previous profit forecast. We expect the company's net profit to be 2.33, 2.5, and 2.92 billion yuan in 2024-2026. Based on the closing price on July 30, the corresponding PE is 9.4, 8.8, and 7.5 times, maintaining a “buy” rating.

Risk warning: 1) coal prices fell sharply; 2) macroeconomic growth fell short of expectations; 3) the commissioning progress of new projects fell short of expectations.