The company released its 2024 semi-annual report: in the first half of 2024, the company achieved operating income of 92.98 billion yuan, -15.0% year on year; net profit to mother of 9.79 billion yuan, -17.3% year over year; net profit after deducting non-return to mother of 9.66 billion yuan, -17.8% year over year. On a quarterly basis, in the second quarter of 2024, the company achieved operating income of 47.59 billion yuan, -5.2% year-on-year, +4.8% month-on-month; net profit to mother 4.82 billion yuan, +3.0% year over month; net profit without return to mother 4.76 billion yuan, +3.2% YoY and -2.6% month-on-month.

The amount of commercial coal produced by 2024H1 fell slightly, and the price drop affected gross profit: According to the company's announcement, 1) In terms of production and sales volume: In the first half of 2024, the company insisted on its primary responsibility for energy security and stable supply, and released advanced production capacity in an orderly manner. Dahaize and Dongfang Open Pit Coal Mine continued production, achieving commercial coal production of 66.5 million tons (-0.9% YoY), of which 60.82 million tons (-0.9% YoY) /5.68 million tons (YoY -1.2%), completed commercial coal sales of 133.55 million tons (-8.9% YoY), with sales of self-produced commercial coal 66.19 million tons (+2.1% YoY), with sales volume of purchased trade coal 64.37 million tons (-15.5% YoY). 2) Price aspect: The unit price of commercial coal produced by the company in 2023 was 584 yuan/ton (-6.4% YoY), of which the unit price of thermal coal/coking coal was 511 yuan/ton (-6.8% YoY) /1,371 yuan/ton (-2.9% YoY), respectively. The unit price of bought out trade coal was 603 yuan/ton (-12.9% YoY). 3) Cost aspect: Due to the year-on-year increase in material costs due to the increase in the volume of self-operated divestitures in open pit mines and changes in the geological conditions of the coal mine, etc., as well as the increase in labor costs due to the increase in the level of remuneration, the sales cost per unit of the company produced its own commercial coal in the first half of 2024 was 292.88 yuan/ton (+2.7% year over year). 4) In terms of gross profit: The gross profit per unit of self-produced commercial coal tons in the first half of 2024 was 291.12 yuan/ton (-14.1% year-on-year).

2024H1 benefited from lower raw material prices and a year-on-year increase in gross margin of the chemical business: According to the company's announcement, the company's sales volume of polyethylene/polypropylene/urea/methanol/ammonium nitrate in the first half of 2024 was 39.3/36.7/1.183/0.859/0.281 million tons (+2.9%/0.0%/-1.3%/-11.5%/-3.8%, respectively). The unit price of polyethylene/polypropylene/urea/methanol/ammonium nitrate was 7287/6600/2167/1773/2178 yuan/ton respectively (+1.8%/-0.6%/-12.8%/+0.2%/-9.8%, respectively). The unit cost of polyethylene/polypropylene/urea/methanol/ammonium nitrate was 5876/5855/1470/1705/1303 yuan/ton (-2.7%/-3.5%/-12.9%/-13.6%/-6.3%, respectively). In the first half of 2024, the company's coal chemical business achieved gross profit of 2.212 billion yuan, an increase of 0.339 billion yuan over 1.873 billion yuan in the first half of 2023, an increase of 18.1%; the gross profit margin was 20.4%, an increase of 3.7 percentage points over 16.7% in the first half of 2023.

Promoting the construction of “two joint ventures”, the Libi Coal Mine, which produces 4 million tons of anthracite per year, is progressing smoothly. According to the company's announcement, the company continued to advance a number of major projects in the first half of the year. According to the company's announcement, the coal mine production capacity was released steadily, and commercial coal production increased by 2.85 million tons over the same period last year; the Libi Coal Mine, which produces 4 million tons of anthracite per year, is progressing smoothly and is scheduled to be put into operation next year. 2) On the chemical side, construction of the second phase of the Shaanxi Yulin Coal Chemical Project with an annual output of 0.9 million tons of polyolefins began, and the implementation of the Tuke 0.1 million ton “liquid sunshine” demonstration project was accelerated. 3) In terms of electricity, the Antaibao 2×350MW low calorific value coal power generation project is about to achieve “double investment”, with 100MW agricultural and solar complementation and a total of 260 MW photovoltaic projects to accelerate construction; the Wushenqi 2×660MW integrated coal project is progressing with high quality, the Shanghai Energy Stabilization Headquarters's high-quality coal output, and the first phase of the new energy demonstration base 263MW project has good benefits. The second 132MW project has entered the accelerated construction stage.

Pay attention to shareholder returns and distribute 2023 special dividends & 2024 mid-term dividends: According to the announcement, in May 2024, the company received proposals from controlling shareholders and decided to implement special dividends and 2024 mid-term dividends. According to the company's dividend announcement on August 13, 2024, the company distributed a total cash dividend of 0.555 yuan (tax included) per share to all shareholders, with a total cash dividend of 7.36 billion yuan. The 2023 dividend plus special dividend estimated the company's dividend rate was 37.7%, corresponding to the company's stock price on August 27, 2024, with a dividend rate of about 4.1%. Furthermore, according to the announcement of the 2024 interim profit distribution plan issued by the company on August 23, 2024, the company plans to distribute an interim cash dividend of 2.936 billion yuan, or 0.221 yuan (tax included) per share, with a dividend rate of 30%.

Investment advice: As a large coal state-owned enterprise, the company operates steadily and various financial indicators are gradually being restored. The release of new production capacity brings room for growth, and the valuation level is expected to rise. We expect the company's revenue for 2024-2026 to be 195.54 billion yuan, 201.896 billion yuan, and 208.525 billion yuan, respectively, with growth rates of 1.3%, 3.3%, and 3.3%; net profit to mother will be 19.46 billion yuan, 20.291 billion yuan, and 21.306 billion yuan respectively, with growth rates of -0.4%, 4.3%, and 5.0% respectively. Maintain an investment rating of “increase holdings - A” and give 2024 10xPE, with a target price of 14.7 yuan for 6 months.

Risk warning: risk of impairment of large assets, failure to advance policies, falling short of expectations, project progress falling short of expectations, fluctuating coal prices, production risk of safety accidents