Event: On October 23, 2024, the company released its report for the third quarter of 2024. In the first three quarters of 2024, the company achieved operating income of 140.41 billion yuan, down 10.1% year on year; net profit to mother was 14.61 billion yuan, down 12.4% year on year; net profit after deducting non-return to mother was 14.43 billion yuan, down 12.9% year on year.

Net profit from 24Q3 fell slightly year on year and increased slightly from month to month. In 24Q3, the company achieved operating income of 47.43 billion yuan, up 1.2% year on year and 0.3% month on month; net profit to mother was 4.83 billion yuan, a slight decrease of 0.6% year on year and a slight increase of 0.2% month on month; net profit without return to mother was 4.77 billion yuan, a slight decrease of 1.0% year on year and a slight increase of 0.1% month on month.

Under international accounting standards, the company achieved net profit of 4.94 billion yuan in 24Q3, an increase of 0.6% over the previous year.

In 24Q3, gross margin declined month-on-month, and expense ratios declined slightly month-on-month. The 24Q3 company achieved gross profit of 11.16 billion yuan, down 6.3% from month to month; gross margin was 23.5%, down 1.5 pct from month to month; the cost ratio for the period was 4.5%, a slight decrease of 0.1 pct from month to month. Although the 24Q3 coal chemical business performance was slightly dragged down, on the one hand, the company's coal business grew steadily month-on-month under the guarantee of Gao Changxie; on the other hand, the company's net investment income was 0.66 billion yuan, up 6.6% month-on-month, the income tax rate was 20.4%, and the month-on-month decline was 2.8 pcts, thus achieving a month-on-month increase in the company's performance.

24Q3 coal production and profitability increased year-on-month. 1) Production and sales volume: 24Q3's commercial coal production was 35.81 million tons, +5.2% year over month, and +6.0% month on month; among them, thermal coal/coking coal production was 32.93/2.88 million tons, respectively, +5.5%/+1.8% year over year, and +6.6%/+0.3% month on month. In the same period, sales volume of self-produced commercial coal was 34.19 million tons, -1.8% year-on-year and +0.9% month-on-month. 2) Price: The price of 24Q3 self-produced thermal coal/coking coal was 488/1176 yuan/ton, -3.0%/-7.1% YoY and -4.0%/-5.0% month-on-month. 3) Costs:

The unit cost of self-produced commercial coal in 24Q3 was 274.4 yuan/ton, -12.2% year-on-year and -6.9% month-on-month. In terms of items, labor costs and other costs all declined year-on-month. 4) Gross profit: The gross profit per unit of self-produced commercial coal in 24Q3 was 270.1 yuan/ton, gross margin was 49.6%, +5.0 pct year over year, +1.2 pct month on month.

Coal chemical profits declined month-on-month in 24Q3. The 24Q3 company produced 38.5/0.293/0.344/0.143 million tons of polyolefin/urea/methanol/ammonium nitrate, respectively, +10.0%/-46.3%/-30.1%/+17.2%; the prices were 7003/2015/1752/1948 yuan/ton, +1.0%/-9.6%/+2.1%/-16.0% YoY; the gross profit for each product ton was 686/281/-217/689 yuan, respectively, with year-on-year changes of -17.5%/-67.5% /Loss/+339.5%, and the month-on-month changes were -43.9%/-60.7%/-60.7% /loss/-30.7%, respectively.

Investment advice: The company's main coal business has internal and external scalability, and the combination of high and long-term cooperative characteristics ensures a steady increase in profits; moreover, the integrated coal chemical collaboration model helps to increase valuation. We expect that from 2024 to 2026, the company will achieve net profit of 18.958/19.9/21.411 billion yuan, corresponding EPS of 1.43/1.50/1.61 yuan/share, respectively, and PE corresponding to the closing price on October 23, 2024 will be 9/9/8 times, respectively, maintaining the “recommended rating”.

Risk warning: Prices of coal and coal chemical products fell sharply; the progress of coal mine commissioning fell short of expectations; significant depreciation was calculated.