Incident: The company achieved operating income of 253.9 billion yuan in the first three quarters of 2024, +0.6% year-on-year; realized net profit of 46.1 billion yuan, or -4.5% year-on-year. Among them, the third quarter of 2024 achieved revenue of 85.8 billion yuan, +3.4% year-on-year; realized net profit of 16.6 billion yuan, or +10.5% year-on-year, and +21.7% month-on-month.

The performance of the coal business is stable, and production and sales are rising steadily. In Q1-Q3 2024, the company achieved 0.24/0.35 billion tons of coal production/sales (+1.0%/+3.8%), including 0.24 billion tons of self-produced coal (+0.9%) and 0.1 billion tons of purchased coal (+11.8%); annual sales volume of Changxie 0.18 billion tons (-8.3% YoY, accounting for 53.2%), monthly Changxie sales volume of 0.11 billion tons (YoY +41.1%, accounting for 32.4%) . Changxie has strong price resilience and stable performance. The average annual price of the 2024Q1-Q3 Changxie (excluding tax) was 492 yuan/ton (-2.6% YoY), the average monthly Changxie price was 713 yuan/ton (-12.8% YoY), and the overall average price was 564 yuan/ton (-3.3% YoY). Profits from self-produced coal are stable, and prices and costs have declined slightly. The sales cost of self-produced tons of coal was 300 yuan/ton (-1.7% YoY), gross profit of tonnes of self-produced coal was 231 yuan/ton (-4.3% YoY), and the gross profit margin was 43.5% (-0.6 pct YoY).

Electricity sales increased, electricity prices fell, and gross electricity profit declined slightly. Production and sales increased, and the utilization rate declined. From January to September 2024, the company added 305 megawatts of installed power generation capacity, generating and selling electricity +7.6%/+7.8% year-on-year, and the average utilization time was 3,745 hours (-3.1% year over year). Selling prices have decreased, and gross profit has decreased. Electricity sales price -3.6% YoY, electricity sales cost -0.7% YoY, 2024Q1-Q3 power business revenue +3.4% YoY, total gross profit of electricity 11.18 billion yuan, -8.1% YoY.

The road, port and shipping business is operating steadily, and the performance of the coal chemical industry is under pressure. 2024Q1-Q3 Railway Revenue/Gross Profit YoY -1.0%/-0.8%; Port Revenue/Gross Profit YoY +3.1%/-2.0%; Shipping Revenue/Gross Profit YoY +3.9%/+52.7% YoY. In terms of coal chemicals, coal-to-olefin production equipment was overhauled according to the plan, and the production and sales volume of polyolefin products declined. 2024Q1-Q3 Coal Chemical's revenue/gross profit ratio -9.9%/-23.8% YoY.

In terms of new projects: On the coal side: The Xinjie No. 1 Well and Xinjie No. 2 Well projects in the Taigemiao mining area of Xinjie Autonomous Region have been approved by the National Development and Reform Commission and are currently in the preparation stage before commencement; the Xinjie Mitsui and Xinjie Sijing projects have obtained prospecting warrants, and are currently actively promoting coal resource exploration and related warrant applications. Electricity: Guoneng (Huizhou) Thermoelectric Phase II gas cogeneration 1000MW project was officially put into operation in October 2024; the Fujian Shishi Hongshan Thermal Power Plant Phase III 1×1,000MW unit expansion project was approved.

We expect net profit to be 61.25/62.97/63.72 billion yuan in 2024-2026, +2.6/+1.2 compared to +2.6/+1.2, EPS of 3.08/3.17/3.21 yuan; the corresponding PE of the stock price on October 30, 2024 will be 13.12/12.76/12.61 times. The company's coal production capacity will continue to increase in the future, the integrated coal and electricity operation performance is strong and resilient, and the dividend ratio is expected to increase, giving it a “highly recommended” rating.

Risk warning: The economic growth rate fell short of expectations; coal prices fell sharply; progress in construction fell short of expectations.