Lu'an Huanneng released the 2024 third quarter report on October 30, 2024:

In the first three quarters of 2024, the company achieved operating income of 26.649 billion yuan, a decrease of 19.28% year on year; net profit of 2.798 billion yuan, a decrease of 61.51% year on year; net cash flow from non-return to mother of 2.821 billion yuan, a decrease of 61.05% year on year; net cash flow from operating activities was 3.733 billion yuan, a decrease of 59.78% year on year; basic income per share was 0.94 yuan, a decrease of 61.32% year on year; weighted average ROE was 5.89%, year on year Decreased by 9.02 percent.

2024Q3 achieved operating income of 8.995 billion yuan, a year-on-year decrease of 19.19%, which was the same; net profit to mother was 0.572 billion yuan, a year-on-year decrease of 71.03% and a decrease of 39.09%; net profit after deducting non-return to mother of 0.572 billion yuan, a year-on-year decrease of 71.03% and a decrease of 40.70% month-on-month; net cash flow from operating activities was 0.879 billion yuan, a year-on-year decrease of 80.11%.

Q3 injection coal production increased month-on-month, and Q4 raw coal production is expected to continue to grow

In the first three quarters of 2024, the company's raw coal production was 42.47 million tons, down 4.82% year on year, of which mixed coal production was 21.21 million tons (-4.29% year on year), injection coal production was 14.99 million tons (-6.49% year on year); commercial coal sales were 38.07 million tons, down 5.79% year on year, of which mixed coal sales were 21.24 million tons (down 3.59% year on year), and injection coal sales were 14.88 million tons (same year on year) (A decrease of 3.94% from the ratio).

2024Q3's raw coal production was 14.8 million tons (-1.86% yoy, +2.56% month-on-month), mixed coal production was 7.44 million tons (YoY +8.61%, month-on-month +1.64%), and injection coal production was 5.29 million tons (-8.95% YoY, +9 month-on-month).

07%); commercial coal sales were 13.52 million tons (YoY +1.81%, month-on-month +6.12%), mixed coal sales were 7.39 million tons (YoY +10.79%, +1.23% month-on-month), and injection coal sales were 5.52 million tons (-2.65% YoY, +15 month-on-month).

72%).

Looking ahead to Q4, Shanxi's target for raw coal production in 2024 is 1.3 billion tons, and raw coal production in the first three quarters was 0.934 billion tons. It is estimated that the 2024Q4 raw coal production was 0.366 billion tons, up 7.06% year on year and 5.95% quarter on quarter. Considering Shanxi's Q4 raw coal production target, we expect Q4 raw coal production in Shanxi to increase further month-on-month. As the leading coal injection company in Shanxi, Lu'an Huaneng is expected to further increase in Q4 production.

Prices are falling and costs are rising, and profits are under pressure

In the first three quarters of 2024, the company's coal price was 662 yuan/ton, a year-on-year decrease of 12.31%; the cost of a ton of coal was 376 yuan/ton, an increase of 9.55%; gross profit of a ton of coal was 286 yuan/ton, a year-on-year decrease of 30.53%.

The price of 2024Q3 tons of coal was 624 yuan/ton (-13.23% YoY, -7.82% month-on-month), the cost of a ton of coal was 385 yuan/ton (+8.26% YoY, +5.25% month-on-month), and the gross profit per ton of coal was 240 yuan/ton (-34.20% YoY, -23.14% month-on-month).

Profit forecast valuation and investment rating: Considering the weak operation of coal prices, we lowered the company's profit forecast for 2024-2026. The estimated revenue for 2024-2026 was 34.405, 35.686, and 36.694 billion yuan, respectively (the original forecast value was 353.

6, 36.702, 37.755 billion yuan), realized net profit of 3.511, 3.959, and 4.32 billion yuan (original forecast values were 4.646, 5.139, and 5.54 billion yuan), earnings per share were 1.17, 1.32, and 1.44 billion yuan, respectively. The current stock price was 15.35 yuan, and the corresponding PE was 13.1X/11.6X/10.6X, respectively. Considering that downstream steel mill blast furnaces are gradually becoming larger, demand for injection coal is expected to continue to grow. As the leading target for domestic injection coal, we are optimistic about its future growth space and maintain a “buy” rating.

Risk warning: Technological mine construction progress falls short of expectations, coal prices continue to drop sharply, capacity utilization falls short of expectations, and research data are not updated in a timely manner.