H1's performance is steady, and the integration of coal and electricity is advancing at an accelerated pace. Maintaining the “Buy” rating, the company released its 2024 semi-annual report. 2024H1 achieved revenue of 5.985 billion yuan, -4.40% year over year, achieved net profit of 1.176 billion yuan, or -10.11% year-on-year, and realized net profit without deduction of 1.138 billion yuan to mother, or -11.57% year over year. Among them, Q2 achieved revenue of 2.927 billion yuan, -4.27% month-on-month, realized net profit of 0.578 billion yuan, or -3.25% month-on-month; realized net profit without deduction of 0.556 billion yuan, or -4.50% month-on-month. Facing market coal price fluctuations in the first half of the year, the company achieved relatively steady performance with a high proportion of Changxie coal and coal-electricity integration. Looking ahead to 2024H2, coal prices will still have the advantage of facing the peak of winter; production and sales recovery due to marginal relaxation of safety supervision in Anhui; the second half of the year may increase feed-in electricity during peak electricity consumption compared to the first half of the year; and the increase in profits due to the commissioning of the second phase of Lixin Power Plant. We raised our 2024 profit forecast and maintained our 2025-2026 profit forecast. We expect to achieve net profit of 25.1 (original value 24.4) /2.71/3.19 billion yuan in 2024-2026, +19.0%/+19.0% compared to the same period; EPS was 0.97/1.04/1.23 yuan, respectively. We are optimistic about the profit growth brought about by the company's integrated coal and electricity layout, and the higher performance stability brought about by complete integration. It is expected that the company's valuation will also increase significantly and be maintained.” “Buy” rating.

H1 The volume of improved coal quality fell and the price rose, and the volume and price of the electricity business rose sharply

Coal business: In terms of production, 2024H1's raw coal production was 10.379 million tons, -7.65% year over year, and commercial coal production/sales volume was 9.36/9.1 million tons, -4.82%/-10.24% year over year. Commercial coal production and sales declined year on year. Looking at Q2 alone, raw coal production was 5.36 million tons, +6.99% month-on-month, commercial coal production/sales volume was 4.67/4.58 million tons, -0.61%/+1.23% month-on-month. Q2 raw coal production increased month-on-month but the washing rate declined, leading to a month-on-month decline in commercial coal production. At the same time, production and sales rate increased 1.8 pct to 98.2%, indicating a decrease in inventory growth but still a net increase. In terms of price, the average price of coal sold by 2024H1 Company was 564 yuan/ton, +4.9% year-on-year. The reverse market increase in coal prices was mainly due to a sharp increase in coal quality compared to the same period in 2023. Looking at Q2 alone, the average price of coal was 554 yuan/ton, -3.5% month-on-month, mainly due to the month-on-month decline in coal prices, but still +3.1% year over year, mainly due to improved coal quality. Electricity business: In terms of power generation, 2023H1 achieved 4.61 billion kilowatt-hours of power generation, +12.41% year over year, feed-in power generation of 4.353 billion kilowatt-hours, and electricity sales increased significantly year over year; in terms of single Q2, it achieved 2.148 billion kilowatt-hours of power generation, -12.75% month-on-month, and 2.021 billion kilowatt-hours of feed-in electricity, -13.34% year over year. In terms of price, the decline in electricity sold by the company was mainly due to better hydropower output squeezing demand for coal electricity; in terms of price, 2024H1's average feed-in price was 0.4115 yuan/kilowatt-hour, +1.28% year over year. The increase in electricity prices was mainly due to the company receiving a peak shifting service fee of 15 million yuan.

Accelerate the integration of coal and electricity, and it is expected to achieve high dividends in the future

The integration of coal and electricity accelerates: In March 2024, the company officially started construction of the Shangrao Power Plant (2*1000MW) and Chuzhou Power Plant (2*660MW); in June 2024, construction of the Lu'an Power Plant (2*660MW) officially began. In October 2024, the second phase of the Lixin Power Plant is expected to be completed and put into operation, and the company's coal power integration has entered a stage of rapid development. With 4 power plants under construction put into operation in 2026, the company is expected to fully integrate coal and electricity, and profit stability is expected to be further enhanced. At the same time, the company is actively developing green power coal power joint ventures. It plans to lay out the 4.19 MW distributed photovoltaic power generation project in the Maoji Experimental Zone, the 0.1 million kilowatt wind power project in the southern part of Lixin County, and the 0.09 million kilowatt water surface photovoltaic project in the collapse area of the Xinji Second Mine, and aims to achieve 1000 MW of new energy installed capacity by the end of 2025. Dividends are expected to increase: The company is a state-owned enterprise, benefiting from the market value management policies of central enterprises, and has the incentive to increase dividends. Although the company is currently still in the investment period for power plant construction, the dividend ratio is still rising. As the company's capital expenditure period ends, based on a stable profit level and high ROE, the company is expected to achieve high dividends in the future, and the valuation is expected to increase.

Risk warning: Economic recovery fell short of expectations; coal prices fell beyond expectations; progress in adding production capacity fell short of expectations.