Key points of investment:

Incident: The Shaanxi coal industry released its 24-year semi-annual report, and the performance was in line with expectations. Revenue for the first half of '24 was 84.737 billion yuan, down 6.5% year on year; net profit attributable to shareholders of listed companies was 10.556 billion yuan, down 8.8% year on year. Non-net profit was deducted at 11.182 billion yuan, a year-on-year decrease of 17.97%.

Coal sales increased slightly in the first half of '24, and coal prices were under year-on-year pressure. According to the company's announcement, in the first half of '24, the company achieved coal sales volume of 131.5499 million tons, an increase of 2.29% over the previous year. The company achieved commercial coal production of 86.4067 million tons, an increase of 2.78% over the previous year. By production area, production in the northern Shaanxi mining area reached 55.7523 million tons, up 1.64% year on year; production in the Binhuang mining area reached 26.1,728 million tons, up 8.36% year on year; and production in the Weibei mining area reached 4.4817 million tons, a decrease of 11.51% year on year. Affected by fluctuations in coal prices, the company's self-produced coal sold for 538.2 yuan/ton in the first half of '24, a year-on-year decrease of 9.51%.

The price of purchased coal was 638.6 yuan/ton, a year-on-year decrease of 14.33%.

The company implements mid-term dividends to return shareholders. The company issued the “2024 Mid-Term Profit Distribution Plan”. Based on the company's share capital of 9.695 billion shares, it plans to distribute cash dividends of 1.09 yuan (tax included) to the company's shareholders for every 10 shares, with a total cash dividend amount of 1.056 billion yuan, accounting for 10% of the net profit attributable to shareholders of the parent company achieved in the current consolidated statement (unaudited).

In line with the company's 2024 mid-year report, adjust profit forecasts to maintain a “buy” rating. Based on the company's coal sales price situation in the first half of the year, taking into account the weak overall coal price in July-August, we slightly lowered our 24-26 profit forecast. We expect net profit to mother for 24-26 to be 21.328/24.145/24.984 billion yuan, respectively (the original 24-26 year value was 21.604/24.943/25.093 billion yuan). The current market capitalization corresponds to 24-26 PE of 11X, 10X, and 9X respectively. Because both China's Shenhua and the company are high-quality domestic thermal coal producers and have outstanding resource factor endowments, the two are comparable. According to iFind's unanimous expectations, China Shenhua's net profit in '24 was 60.036 billion yuan, which is 13 times the PE multiple of the current share price. Maintain a “buy” rating.

Risk warning: Major changes in the energy structure; significant release of new coal production capacity; production safety accidents