Incident: On October 25, 2024, the company released its 2024 three-quarter report. The first three quarters achieved operating income of 106.633 billion yuan, a year-on-year decrease of 21.50%; net profit to mother was 11.405 billion yuan, a year-on-year decrease of 26.98%.

24Q3 performance increased slightly month-on-month. The 24Q3 company achieved net profit of 3.837 billion yuan, a year-on-year decrease of 15.63% and a month-on-month increase of 0.66%. 24Q3 confirmed net exposure hedging income - $-0.304 billion.

Coal production and sales increased in the first three quarters of 2024, and prices declined. In the first three quarters of 2024, the company achieved coal production of 105.812 million tons, up 8.8% year on year, and sold 102.591 million tons of coal, up 3.5% year on year. Among them, sales of self-produced coal were 96.221 million tons, an increase of 9.0% year on year. The comprehensive price of coal was 683.49 yuan/ton, a year-on-year decrease of 18.7%, of which self-produced coal sold at 662.89 yuan/ton, a year-on-year decrease of 16.5%. The cost of a ton of coal was 379.2 yuan/ton, a year-on-year decrease of 14.8%, and the cost of self-produced coal was 342.5 yuan/ton, a year-on-year decrease of 1.9%.

The coal business achieved gross profit of 31.22 billion yuan, a year-on-year decrease of 20.6%.

In 24Q3, the cost of self-produced coal fell month-on-month, and gross profit increased month-on-month. 24Q3 achieved coal production of 36.734 million tons, up 9.8% year on year, up 6.7% month on month, and completed coal sales of 34.716 million tons, up 4.5% year on year and 3% month on month. Among them, self-produced coal sales volume was 32.463 million tons, up 8.9% year on year and 0.5% month on month. The comprehensive sales price was 655.9 yuan/ton, down 6.2% year on year and 1.8% month on month. Among them, self-produced coal sold at 653.7 yuan/ton, down 2.3% year on year and 0.9% month on month. The cost of a ton of coal was 326.7 yuan/ton, down 15.5% year on year and 10.7% month on month. The cost of self-produced coal was 308.7 yuan/ton, down 3.1% year on year and 12.1% month on month. The gross profit of the coal business was 11.43 billion yuan, up 10.1% year on year and 12.4% month on month.

The gross profit of the non-coal business increased month-on-month. In terms of chemical business, 24Q3 completed sales of 1.95 million tons of chemicals, a year-on-year decrease of 7.6% and a year-on-month increase of 4.5%. The chemical business achieved gross profit of 1.488 billion yuan, a year-on-year decrease of 18.2% and a year-on-month increase of 13.9%. In terms of power business, 24Q3 completed 2.096 billion kilowatt-hours of power generation, a year-on-year decrease of 11.8% and a year-on-month increase of 7.5%. The power business achieved gross profit of 0.084 billion yuan, an increase of 31.3% year on year and 171% month on month. The 24Q3 non-coal business achieved a total gross profit of 1.583 billion yuan, a year-on-year decrease of 16.6% and a year-on-month increase of 17.5%.

It is proposed to invest in the construction of a 0.8 million tons/year olefin project. Rongxin Chemical, a wholly-owned subsidiary of the company, plans to invest in a project with an annual output of 0.8 million tons of olefins, with an investment amount of 9.574 billion yuan. The main products are 0.4 million tons/year of high-density polyethylene and 400,000 tons/year of polypropylene. The company relies on Rongxin Chemical's existing industrial base to develop a high-end polyolefin industry chain, which helps the company increase the added value of products and market competitiveness.

Investment advice: We expect the company's net profit to be 14.834/16.457/17.777 billion yuan in 2024-2026, corresponding EPS of 1.48/1.64/1.77 yuan/share, respectively, and the PE corresponding to the stock price on October 25, 2024 will be 11/10/9 times. Maintain a “Recommended” rating.

Risk warning: Prices of coal and chemicals have dropped sharply, there is uncertainty about new construction projects, and large asset impairment losses are calculated.