Incident: On September 14, 2024, China Shenhua announced the main operating data for August 2024. Among them, coal production and sales volume, electricity production/sales volume, and coal chemical sales all increased to varying degrees over the same period last year.

The amount of electricity sold increased significantly over the same period last year. In terms of power generation, the company's total power generation capacity in August 2024 was 22.09 billion kilowatt-hours, up 15.3% year on year and 10.3% month on month; from the beginning of 2024 to August, the company's cumulative power generation capacity was 146.16 billion kilowatt-hours, up 4.6% year on year. In terms of electricity sales, electricity sales in August 2024 were 20.79 billion kilowatt-hours, up 15.8% year on year, up 10.5% month on month; from the beginning of 2024 to August, the company's electricity sales volume was 137.5 billion kilowatt-hours, up 4.7% year on year. The main reason for the increase in power generation was the increase in electricity volume brought about by new units put into operation, and the low base for the same period last year.

Coal production and sales are growing steadily. Commercial coal production in August 2024 was 27.8 million tons, up 1.8% year on year; from the beginning of 2024 to August, the company's cumulative commercial coal production was 217.8 million tons, up 1.4% year on year. In August 2024, the company's coal sales volume was 38.7 million tons, the same as the previous year; from the beginning of 2024 to August, the company's cumulative coal sales volume was 308.4 million tons, up 4.7% year on year.

Coal chemical sales rose year-on-year in August. In August 2024, the company's polyethylene sales volume was 32.0 thousand tons, up 4.2% year on year; from early to August 2024, polyethylene sales volume was 210.7 thousand tons, down 12.9% year on year. In August 2024, polypropylene sales volume was 29.4 thousand tons, up 2.8% year on year; from 2024 to August, polypropylene sales volume was 198.3 thousand tons, down 13.5% year on year. The main reason for the year-on-year decline in sales of polyethylene and polypropylene from the beginning of the year to August is that coal-to-olefin production equipment was stopped and overhauled from April to May as planned, and production of polyolefin products declined.

Railway transportation turnover increased, and shipping freight volume declined year-on-year. In August 2024, the company's own railway turnover was 25.3 billion tonkilometers, an increase of 0.8%; from the beginning of 2024 to August, the turnover of its own railways was 211 billion tonkilometers, an increase of 4.6% over the previous year. In terms of shipping volume, the company's shipping cargo volume in August 2024 was 11.5 million tons, a year-on-year decrease of 9.4%; from the beginning to August 2024, the shipping volume was 88.2 million tons, a decrease of 10.0% year-on-year. The main reason for the year-on-year decline in the company's shipping volume was business restructuring and a high base for the same period last year.

Investment proposal: The company's vertically integrated operation of coal circuit port navigation and a high proportion of coal long-term cooperation guarantee relatively stable profitability, and there is still room for improvement in the company's coal scale. The Xinjie First Well and Xinjie Second Well projects in the Taigemiao mining area of Xinjie, Inner Mongolia have been approved and approved by the National Development and Reform Commission. The construction scale of both projects is 8 million tons/year. At the same time, in the context of the new “National Nine Rules” encouraging listed companies to increase their dividend frequency and dividend ratio, we believe that the company will continue to give back to investors in the form of high dividends, and the long-term investment value of the company is remarkable. The company's net profit from 2024-2025 is expected to be 60.044/62.176 billion yuan, with earnings per share of 3.02/3.13 yuan. The current stock price is 12.65 times PE in 2024, maintaining the “increase in holdings” rating.

Risk warning: risk of coal demand falling short of expectations, risk of production safety accidents, company management and operation risks, etc.