The company released its 2024 semi-annual report: From January to June 2024, the company achieved operating income of 5.985 billion yuan, -4.40%; net profit to mother was about 1.176 billion yuan, -10.11% year over year; net profit after deducting non-return to mother was 1.138 billion yuan, -11.57% year over year. On a quarterly basis, according to the company's announcement, in the second quarter of 2024, the company achieved operating income of 2.927 billion yuan, -12.99% year-on-year, and -4.27% month-on-month; net profit to mother was 0.578 billion yuan, -19.03% year-on-year, and -3.25% month-on-month.

In 24Q2, coal production and sales volume and thermal power generation both declined year on year: 1) In terms of coal business, in the second quarter of 2024, the company produced 5.3647 million tons of raw coal, -5.94% year on year, +6.99% month on month; commercial coal production was 4.6658 million tons, -7.90% year on year, -0.61% month on month; commercial coal sales volume was 4.5797 million tons, -14.53% year on month, +1.23% month on month. The price of a ton of coal was 553.63 yuan/ton, +1.89%, or -3.70%; the cost of a ton of coal was 331.56 yuan/ton, -1.22% YoY, -4.32%; gross profit of tons of coal benefited from the improvement in commercial coal quality in the first half of the year compared to the same period last year, and continued cost control finally achieved 222.07 yuan/ton, +6.91% YoY and -2.77% month-on-month. 2) In terms of power business, in the second quarter of 2024, the company generated 2.148 billion kilowatts, -0.74% year-on-year, -12.75% month-on-month; feed-in electricity volume was 2.021 billion degrees, -0.98% year-on-year, and -13.34% month-on-month.

Reduced coal sales combined with increased management expenses affected 24H1 performance: According to the company's announcement, the year-on-year decline in 2024H1 was mainly a decrease of 1.0387 million tons in commercial coal sales compared to the same period of the previous year, an increase of 24.46 yuan/ton in the sales price without tax, and a decrease of 337.916 million yuan in comprehensive revenue; electricity sales increased by 0.483 billion yuan over the same period of the previous year, and the sales price without tax increased by 0.0051 yuan/kilowatt compared to the same period last year. In addition, 24H1 management expenses increased by 31.59% year over year, due to wage expenses and social security base adjustments.

Investment advice: Buy-A investment rating. We expect the company to achieve revenue of 12.614 billion yuan, 13.301 billion yuan, and 15.798 billion yuan respectively in 2024-2026, with growth rates of -1.8%, 5.5%, and 18.8%; net profit of 2.301 billion yuan, 2.507 billion yuan, and 2.893 billion yuan, respectively, with growth rates of 9.1%, 8.9%, and 15.4% respectively. As a listed coal company under China Coal Group, the company has an excellent coal resource location and large reserves. It mainly sells thermal coal, and Changxie accounts for a high share to enhance performance stability. At the same time, thermal power projects under construction or proposed are basically located in or around Anhui Province, and are close to the company's coal mines. Assuming that the performance of all thermal power projects is expected to increase significantly in 2026. At that time, the synergetic advantages of the company's coal and electricity integration will be fully exploited, further improving the company's profitability and resilience to risks, thus it is expected that the coal stock valuation will shift from coal stock valuation to stable asset valuation of coal and electricity integration. The company was given 13.5xPE in 2024, with a target price of 12.02 yuan for 6 months.

Risk warning: Risk of macroeconomic cycle fluctuations, coal price fluctuations, production safety risks, environmental risks, changes in geological conditions affecting the company's coal quality risk, prospecting rights development progress falling short of expectations, thermal power project construction progress falling short of expectations, prediction assumptions and model errors exceeding expectations, risk of declining coal power usage hours, and risk of falling coal and electricity prices.