24H1's net profit to mother was -11% year-on-year, of which 24Q2's net profit was -14% month-on-month. 24H1 achieved operating income/net profit of 168.1/29.5 billion yuan, -0.8%/-11.3% year-on-year, net profit of 29.48 billion yuan after year, -10.6% year-on-year. Among them, non-financial profit was mainly 0.482 billion yuan from the transfer of 100% equity income of Ordos Shenhua Shendong Real Estate Company, 0.109 billion yuan in government subsidies, and donation of 0.511 billion yuan of funds for comprehensive ecological management in Inner Mongolia. Q2 achieved net profit to mother of 13.62 billion yuan in a single quarter, -14.3%/-7.1% month-on-month.

Coal sector: 24H1 self-produced coal production +2% YoY, average sales price/self-produced coal cost -6%/+2% YoY.

1) Production and sales volume: 24H1 self-produced coal production/sales volume 0.1632/0.1628 billion tons, +1.6%/+2.2% year over year; outsourced coal sales volume 0.067 billion tons, +14.2% year over year. The total sales volume of the Mid-Year Association and the monthly sales volume accounted for 54.4%/31.7%, -2.6/+2.5pct year on year. The year-on-year sales ratio declined slightly, mainly due to a significant increase in outsourced coal sales. 2) Price: 24H1's average sales price (excluding tax) is 566 yuan/ton, -5.8% year-on-year, with an average annual and monthly sales price of 490/725 yuan/ton, -2%/-11.7% YoY. Q2 The average sales price in a single quarter was 559 yuan/ton, -2.5%/-3.9% month-on-month, of which the average annual and monthly sales price was 490/713 yuan/ton, which remained flat/-3.3% month-on-month. 3) Cost: The unit cost of 24H1 self-produced coal was 191.7 yuan/ton, +2% year over year, mainly due to labor costs +18.3% year over year, mainly due to policy increases in social security payments and employee salary increases calculated according to progress. Among them, the unit cost of 24Q2 self-produced coal was 192.8 yuan/ton, +1.2% month-on-month. 4) Sector profit: The coal sector achieved total revenue/profit of 134.33/26.04 billion yuan in the first half of the year, -0.7%/-18.1% year-on-year, achieving a gross profit margin of 28.3%, or -3.5pct year-on-year.

Power generation sector: Volume increases and price reductions were achieved in the first half of the year. Currently, there are still more than 10GW of units under construction and to be built (+23% compared to the current scale). 1) Electricity: The 24H1 company generates/sells 104.04/97.89 billion kilowatt-hours of electricity, +3.8%/+3.9% year-on-year, of which coal-fired power generation/sales volume is 101.8/95.69 billion kilowatt-hours, +3.6% year-on-year. The weighted average utilization time of 24H1's generator sets was 2,323 hours, -6.5% year-on-year, of which the average utilization time of coal-fired units was 2,354 hours, -155 hours (-6.2%) year over year. 2) Price and cost: 24H1 company's comprehensive electricity sales price was 0.404 yuan/kilowatt-hour, -3.3% year over year; average electricity sales cost was 0.362 yuan/kilowatt-hour, -1.5% year over year. 3) Sector profit: The electricity sector achieved total revenue/profit of 44.35/5.25 billion yuan in the first half of the year, +0.4%/-9.5% year-on-year, achieving a gross profit margin of 16%, or -0.8pct year on year.

4) Projects under construction: Currently, the company has 10.4 GW of units under construction and to be built, which can be increased by 23% compared to the current 44.8 GW, and the power generation sector has strong growth potential: 6.8 GW of units under construction (Guangdong Huizhou Thermoelectric 2*400MW, Jiangxi Jiujiang 2*1000MW, Guangxi Beihai 2*1000MW, Guangdong Qingyuan 2*1000MW), 2.64GW of units to be built (2*660MW in Dingzhou, Hebei, 2*660MW), and approved for construction Unit 1GW (Fujian Shishi Hongshan Thermoelectric 1*1000MW).

Railway sector: Actively integrated into the “Belt and Road” economic belt logistics system, 24H1 turnover +7% year-on-year.

24H1 has its own railway turnover of 161.4 billion tons/km, +7.3% year over year. It actively integrates into the “Belt and Road” economic belt logistics system, and successively launched multi-modal transport demonstration projects for China-Europe train containers from Huanghua Port to Shijiazhuang International Dry Port and two-way container intermodal transport from Hejian to Huanghua Port. Non-coal cargo volume was +18.4%; unit transportation revenue/cost was 0.139/0.085 yuan/ton/km, -5.5%/+1.2% YoY. The railway sector achieved total revenue/profit of 22.44/6.92 billion yuan in the first half of the year, +1.4%/+1.9% year-on-year, and a gross profit margin of 37.5%, -0.4 pct year on year.

Improve the ESG governance system, establish a leading group for market value management, and continuously enhance value creation capabilities.

The company continues to improve the ESG governance system, implement the latest ESG regulatory requirements, build a management system to combat climate change and improve ESG ratings. The company was selected by China Central Radio and Television's “China ESG Listed Companies Pioneer 100 (2024)” list. Respond positively to the market value management assessment requirements of the State Assets Administration Commission, set up a market value management leading group to establish a “11257” market value management system characteristic of China's Shenhua.

Profit forecast: The company's coal cooperative accounts for a high share, coal profit stability is strong, new thermal power installations are expected to continue to contribute to the increase, and the company continues to improve its core competitiveness and value creation capabilities as a central energy enterprise. The company's net profit is expected to reach 58.3/59.6/60.1 billion yuan in 24-26, and the corresponding EPS is 2.93/3.00/3.02 yuan. Furthermore, as a large domestic energy state-owned enterprise with leading ESG standards, the company is expected to enjoy a valuation premium with Chinese characteristics. Referring to comparable coal and power companies, the company will be given 15 to 16 times PE for 24 years, with a reasonable value range of 43.99 to 46.92 yuan, maintaining a “superior to the market” rating.

Risk warning. The price of thermal coal has dropped drastically, electricity prices have been drastically lowered, and environmental security checks are difficult to grasp.