Event: On August 21, 2024, the company released its 2024 semi-annual report. In the first half of 2024, the company achieved operating income of 3.893 billion yuan, a year-on-year decrease of 8.13%; net profit to mother was 0.758 billion yuan, a year-on-year decrease of 32.14%. Although 24H1's coal production and sales increased year on year, profits were damaged due to frequent declines in coal prices.

24Q2 revenue and profit both declined year-on-month. In the second quarter of 2024, the company achieved operating income of 1.842 billion yuan, down 7.89% year on year and 10.18% month on month; net profit to mother was 0.327 billion yuan, down 35.78% year on year and 24.11% month on month. The total of the 24Q2 company's four fees decreased by 0.069 billion yuan month-on-month, and the four-rate rate decreased by 1.76 pct month-on-month. Among them, sales/management/finance/R&D rates were +0.20/-3.69/-9.85/+11.58 pct month-on-month, respectively.

24H1 coal production and sales increased year-on-year, with reduced prices, increased costs, and loss of profits. In 24H1, the company achieved 4.9417 million tons of raw coal, +10.33%; commercial coal production of 3.8475 million tons, +6.98%; commercial coal sales volume of 3.8815 million tons, +2.36%; average tonne of coal sales price 954.53 yuan/ton, -9.21% YoY; average tonne coal sales cost was 558.10 yuan/ton, +2.40% YoY. 24H1's gross profit from commercial coal sales was 1.539 billion yuan, -19.86% year over year; gross margin was 41.53%, down 6.63 pct year on year.

In 24Q2, coal sales increased month-on-month, and profits declined month-on-month due to cost reductions less than sales prices. In 24Q2, the company achieved 2.3975 million tons of raw coal production, +5.70%, and -5.77%, of which commercial coal production was 1.8989 million tons, +2.59% year over month, -2.55% month on month; commercial coal sales volume was 1.9644 million tons, +7.84% year on month, +2.47% month on month; average tonne coal sales price was 893.42 yuan/ton, -13.11% year on month, -12.16% month on month; average tonne coal sales cost was 555.11 yuan/ton, yoy + 9.42%, -1.08% month-on-month. In 24Q2, the company's gross profit from commercial coal sales was 0.665 billion yuan, -29.97% year-on-year, and -23.98%; gross margin was 37.87%, down 12.80 pcts year-on-year and 6.96 pcts month-on-month.

The net profit from equity in the power business reversed year-on-year losses, and the impact of the low share of revenue was limited. In the first half of 2024, the company's electricity business achieved net equity profit of 14.7587 million yuan, reversing losses over the previous year. Among the 5 power plants it owns, Qianyingzi Power Generation, Suzhou Thermal Power, and Hengli Electric achieved profits, contributing a total net profit of 30.7335 million yuan, with Qianyingzi Power Generation accounting for 82%; the remaining 2 power plants had a total net equity loss of 15.9748 million yuan. In November 2022, the company and Anhui Energy Co., Ltd. increased capital to build the second phase of the Qianyingzi Power Plant expansion project. The annual power generation capacity of the project is about 4.8 billion kilowatt-hours, and is scheduled to be completed and put into operation by the end of 2024. After the commissioning, the installed capacity of the company's electricity equity will increase to 1,050 MW, an increase of 90.84% over the current level, and is expected to become a new profit growth point.

Investment advice: Considering the downward trend in coking coal prices, we expect the company's net profit to be 1.402/1.554/1.719 billion yuan in 2024-2026, equivalent to EPS of 1.17/1.29/1.43 yuan/share, respectively. The PE corresponding to the closing price on August 21, 2024 is 8/7/7 times, respectively. The company has a high long-term cooperation ratio and steady operation, maintaining a “recommended” rating.

Risk warning: Coal prices have dropped sharply; the Group's asset injections and ongoing projects have fallen short of expectations.