Description of the event

The company released its 2024 semi-annual report: 24H1 achieved operating income of 5.985 billion yuan, -4.40% year on year; realized net profit of 1.176 billion yuan, -10.11% year on year; net profit after deduction of 1.138 billion yuan, -11.57% year on year; basic earnings per share of 0.45 yuan/share, -10.00% year on year; weighted average return on net assets of 8.42%, a decrease of 2.3 percentage points year on year; net cash flow from operating activities was 1.76 billion yuan billion yuan, -10.24% year over year As of June 30, 2024, the company's total assets were 39.752 billion yuan, +15.18% year over year, and equity attributable to parent company shareholders reached 14.403 billion yuan, +11.21% year over year.

Incident reviews

The company's performance was in line with expectations. Revenue, net profit to mother and net operating cash flow declined slightly, mainly due to a decrease in commercial coal sales compared to the same period last year. 24Q2 achieved operating income of 2.927 billion yuan, -12.99% year over month, -4.27% month on month; realized net profit of 0.578 billion yuan, -19.03% year on month, -3.25% month on month; net profit after deduction of 0.556 billion yuan, -21.03% year on year, -4.50% month on month; net cash flow from operating activities was 0.777 billion yuan, -38.26% year over month, and -20.57% month on month, mainly due to the decline in coal revenue Inflow; management expenses of 0.188 billion yuan, +33.48% YoY, +16.20% month-on-month, mainly due to wage costs and social security base adjustments.

Coal business: 24H1 commercial coal sales declined but sales prices increased, and the overall impact on revenue decreased by 0.338 billion yuan. 24 H1's commercial coal production reached 9.3602 million tons, or -4.82% year on year; sales volume reached 9.1036 million tons, -10.24% year over year, down 1.0387 million tons; main coal sales revenue reached 5.136 billion yuan, -6.17% year over year, gross sales profit reached 2.05 billion yuan, -3.62% year on year, sales price increased 24.47 yuan/ton without tax to 564.2 yuan/ton. The coal business is comprehensive Impact revenue decreased by 0.338 billion yuan.

Among them, 24Q2's commercial coal production reached 4.6658 million tons, or -7.90%; sales volume reached 4.5797 million tons, -14.53%; main coal sales revenue reached 2.535 billion yuan, -12.92% year over year; sales price without tax increased 20.25 yuan/ton to 553.6 yuan/ton, down 21.29 yuan/ton from the first quarter. Taken together, 24H1's coal production and sales have shrunk but sales prices have risen, mainly due to stricter safety inspections in the main production areas in Anhui, and strict production control.

Electricity business: The volume and price of the 24H1 power sector rose sharply, and the comprehensive impact revenue increased by 0.218 billion yuan. 24H1 achieved 4.353 billion kilowatt-hours of feed-in electricity, +12.66% year-on-year, and the feed-in tariff was 0.41 yuan/kilowatt-hour, +1.28% year-on-year. Of these, 24Q2 feed-in power was -0.98% YoY and -13.34% YoY. 24H1's electricity business achieved sales revenue of 1.791 billion yuan, and the comprehensive impact revenue increased by 0.218 billion yuan. We believe that the company's overall rise in electricity consumption and electricity prices in the first half of the year was mainly due to strong demand for electricity in the Anhui region, while the slight decline in feed-in electricity in the second quarter was mainly affected by the high base and the increase in hydropower consumption due to better incoming water.

There is plenty of room for subsequent installed capacity increase, and the advantages of integrated coal and electricity will be further highlighted. According to the company's development strategy, the company will build a new integrated coal and electricity base. At present, the company has put into production 2 million kilowatts of coal power. Currently, the Lixin Power Plant Phase II (2*660MW), Shangrao Power Plant (2*1000MW), Chuzhou Power Plant (2*660MW), and Lu'an Power Plant (2*660MW) are under construction, and there is plenty of room for future installed capacity. Currently, the two power plants in operation account for about 40% of the company's production; with the completion and operation of subsequent coal-power projects, the company's coal production capacity and installed electricity capacity will gradually increase, and the synergetic advantages of coal and electricity integration will be fully exploited, further improving the company's profitability and resilience to risks.

Investment advice

The company's 2024-2026 EPS is expected to be 0.82\ 0.92\ 0.99 yuan, corresponding to the company's closing price of 8.63 yuan on July 31, and 10.5\ 9.4\ 8.7 for 2024-2026, respectively. The company's location advantage is remarkable. The Anhui region's economic development is growing rapidly, electricity demand is strong, and the company is backed by China Coal Group. Therefore, we are optimistic that the company's improved performance under installed capacity growth and the room for valuation improvement brought to the company by incorporating market value management into the assessment, and will continue to maintain a “buy-A” rating.

Risk warning

The risk that the macroeconomic growth rate falls short of expectations; the risk that coal prices will fall below expectations; the risk of falling hours of thermal power use; the risk of falling electricity prices; the risk of safety and generation; the risk of asset injection falling short of expectations, etc.