Description of the event

The company released its 2024 semi-annual report: net profit to mother of 9.79 billion yuan in the first half of 2024, -2.05 billion yuan (-17.3%); 2024Q2 realized net profit to mother of 4.82 billion yuan, +0.14 billion yuan (+3%) year on year, and -0.15 billion yuan (-3%) month on month. In addition, the company announced that it will distribute an interim dividend of 2.94 billion yuan based on 30% of net profit from the first half of 2024, with 0.221 yuan (tax included) per share.

Incident comments

Benefiting from the company's increased production and sales volume and improved coal chemical profits, the company's 2024Q2 performance slightly exceeded expectations. Take a look at it specifically:

① Coal: Volume increases hedge price reductions, and profits are implemented smoothly. 1) Production and marketing: Benefiting from the Daze & East Open Pit Coal Mine, actively exploiting the advantages of increasing nuclear production capacity, the 24Q2 company's production and sales both increased significantly. In terms of production, 2024H1 produced 66.5 million tons of commercial coal, -0.62 million tons (-0.9%) year-on-year. Looking at the second quarter of a single quarter, commercial coal production was 33.77 million tons, -0.05 million tons (-0.1%) year over year, and +1.04 million tons (+3.2%) month over month. In terms of sales, 2024H1 sold 133.55 million tons of commercial coal, -13.11 million tons (-8.9%), mainly due to a decrease in trade coal sales; self-produced commercial coal sales were 66.19 million tons, +1.34 million tons (+2.1%) year on year. Looking at the second quarter, sales of self-produced commercial coal were 33.88 million tons, +1.6 million tons (+5.0%), and +1.57 million tons (+4.9%), of which thermal coal sales volume was 30.94 million tons, +1.62 million (+5.5%) year over year, +1.33 million tons (+4.5%) month over month; sales of self-produced coking coal were 2.94 million tons, year on year -0.02 million tons (-0.7%) Compared to +0.24 million tons (+8.9%).

2) Price: Q2 coal prices followed the overall decline in the market. 2024H1 self-produced coal sold for 584 yuan/ton, -40 yuan/ton (-6.4%), of which thermal coal sold for 511 yuan/ton, -37 yuan/ton (-6.8%); coking coal sold for 1,371 yuan/ton (-2.9%) year on year; coking coal sold for 1,371 yuan/ton (-2.9%) year on year. Looking at the second quarter of a single quarter, the price of self-produced coal was 571 yuan/ton, -6 yuan/ton (-1.0%) year-on-year, and -27 yuan/ton (-4.6%) month-on-month. 3) Costs: Increased material and labor costs due to increased divestment and higher employee remuneration. 24H1's self-produced coal sales cost is 295 yuan/ton, +8 yuan/ton (+2.7%). On a year-on-year basis, labor costs increased the most, +14 yuan/ton (+33%), and depreciation and amortization fell the most, -10 yuan/ton (-17.5%) year on year. Looking at the second quarter of a single quarter, the sales cost of the company's own tons of coal was 295 yuan/ton, which was -3 yuan/ton (-1.1%) and +4 yuan/ton (+1.3%) month-on-month.

4) Profit: Decreased coal prices combined with rising costs, and profits fell month-on-month. The gross profit of 24H1 tons of self-produced coal was 291 yuan/ton, -48 yuan/ton (-14.1%); the gross profit from self-produced coal was 19.3 billion yuan, -2.7 billion yuan (-12.3%) year on year; the gross profit margin of self-produced coal was 49.8%, -4.5 pct year on year. Looking at the second quarter of a year, the gross profit of self-produced coal tons was 276 yuan/ton, -3 yuan/ton (-1.0%), and -31 yuan/ton (-10.1%); achieved gross profit of 9.3 billion yuan (+0.4 billion yuan) compared to the previous month, and -0.6 billion yuan (-5.8%) month-on-month; the gross profit margin of self-produced coal was 48.4%, which was basically the same as the previous year, -3.0 pct.

② Coal chemicals: Coal prices fall back to improve costs, and overall profits increase. 24H1's coal chemical business achieved gross profit of 2.212 billion yuan, +0.339 billion yuan (+18.1%) year on year; gross profit margin of 20.4%, +3.7 pct year on year.

In the short term, the company's volume increase flexibility and high long-term coordination ratio are expected to maintain profit stability in an environment of fluctuating coal prices; China Coal Energy's H share dividend ratio is worth paying attention to, and the company's valuation can be expected to be repaired. In the medium term, the Libi Coal Mine (4 million tons/year) and the Weizigou Coal Mine (2.4 million tons/year) are scheduled to be put into trial production in 2025, and the simultaneous development of coal electricity+coal chemical+new energy will establish a sustainable development model.

Investment advice: The company's 2024-2026 performance is expected to be 18.6/18.9/19.3 billion yuan, respectively. Based on the closing price on August 30, the corresponding A share PE is 9.5x/9.3x/9.1x, calculated with a dividend rate of 37.7% under the 2023 declared dividend (including special dividends), and the corresponding dividend rates are 4.0%/4.0%/4.1%, respectively, maintaining the “buy” rating.

Risk warning

1. Economic pressure affects downstream demand risk; 2. There is a risk of unseasonal decline in coal prices or the coal sector due to external factors.