Event: On August 30, 2024, the company released its 2024 semi-annual report. In the first half of 2024, the company achieved operating income of 14.057 billion yuan, a year-on-year decrease of 32.01%; net profit to mother of 1.291 billion yuan, a year-on-year decrease of 58.11%; after deducting non-return net profit of 1.38 billion yuan, a year-on-year decrease of 55.68%.

24Q2 profit increased month-on-month, and the release of the company's performance was affected by the increase in taxes and fees. In the second quarter of 2024, the company achieved operating income of 7.701 billion yuan, a year-on-year decrease of 23.20% and an increase of 21.17%; net profit to mother of 0.707 billion yuan, a year-on-year decrease of 49.28% and an increase of 21.30% month-on-month; net profit after deducting non-return to mother of 0.777 billion yuan, a year-on-year decrease of 44.04% and a year-on-month increase of 28.84%. In 24Q2, corporate taxes and surcharges increased by 0.154 billion yuan month-on-month, including the impact of the increase in the resource tax rate in Shanxi. Four fees increased by 0.157 billion yuan month-on-month, of which sales/management/R&D/financial expenses were +0.46/+0.10/+0.55/+0.046 billion yuan month-on-month, respectively.

Coal production and sales increased month-on-month, and gross margin increased month-on-month. In 24Q2, the company achieved 7.8666 million tons of raw coal output, -25.50%/+4.68%; commercial coal sales volume of 11.5362 million tons, -20.67%/+24.12%; comprehensive commercial coal sales price 654.75 yuan/ton, -3.28%/-1.86% YoY; tonne coal cost 425.44 yuan/ton, +6.56%/-5.08% YoY; gross profit per ton of coal 229.31 yuan/ton, -17.44% /+4.73 %; The gross profit margin of the coal business was 35.02%, -6.0/+2.2pct compared to the same period last month.

Sales of self-produced coal increased month-on-month, and gross margin increased month-on-month due to rising sales prices and slight cost reductions. In 24Q2, the company sold 6.456 million tons of self-produced coal, -33.27%/+18.21%; self-produced coal sold at 705.89 yuan/ton, +6.65%/+6.58%; self-produced tonnes of coal cost 305.74 yuan/ton, +19.24%/-0.85% YoY; gross profit per ton of self-produced coal was 400.16 yuan/ton, -1.31%/+13.06% YoY; gross profit margin of self-produced coal was 56.69%, -4.3.3pct. 24H1, the company's Changchun Coal Industry completed the 6 million tons/year production factor announcement, Ling Zhida Coal completed the 2.4 million tons/year production factor announcement, and Hanjiawa Coal completed the 1.5 million tons/year production factor announcement. We expect 24H2's production to recover.

Trade coal sales increased month-on-month, and gross profit declined markedly in tons. In 24Q2, the company's trade coal sales volume was 5.0802 million tons, +4.38%/+32.53%; the price of trade coal was 589.76 yuan/ton, -16.59%/-12.51%; the cost of a ton of traded coal was 577.55 yuan/ton, -15.47%/-10.79%; gross profit per ton of traded coal was 12.20 yuan/ton, -48.76%/-54.21% year on month; gross profit margin of traded coal 2.07%, -1.3/-1.9pct. 24H1, the company successfully developed coal source channels such as 4700 kcal in Malaysia and 5,700 kcal in Indonesia, and optimized the supply structure of overseas coal markets. The import volume was 5.3624 million tons, an increase of 27.91% over the previous year.

Investment advice: The company's output decreased year-on-year in 2024. We expect the company's net profit to be 2.838/3.253/3.37 billion yuan in 2024-2026, equivalent to EPS of 1.43/1.64/1.70 yuan/share, respectively. PE corresponding to the closing price on August 30, 2024 is 8/7/7 times, respectively. Maintain a “Recommended” rating.

Risk warning: Coal prices have dropped sharply; production recovery falls short of expectations.