Key points of investment:

Incident: The Shaanxi coal industry released the main operating data for November. In that month, coal production increased 11.3% year-on-year. According to the announcement, the company achieved coal production of 14.0623 million tons in the same month, an increase of 11.3% over the previous year. Coal production in November exceeded expectations.

The company's annual coal production and sales are expected to exceed expectations. From January to November, the company achieved cumulative coal production of 151.4107 million tons, an increase of 2.76% over the previous year; the company achieved cumulative sales of 153.8286 million tons of self-produced coal, an increase of 2.72% over the previous year. Considering that December enters the peak seasonal demand season for coal and that demand for coal in the coal chemical industry remains high, demand is expected to drive the company's coal production to maintain a year-on-year growth trend in December, and the company's annual coal production and sales are expected to exceed expectations.

The company plans to transform “coal and electricity integration” through the acquisition of the controlling shareholder's electricity assets. According to the company's announcement, the company signed an “Asset Transfer Intent Agreement” with the controlling shareholder Shaanxi Coal Chemical Group Co., Ltd. on September 5, 2024 to acquire all shares of Shaanxi Coal Electric Power Group held by Shaanxi Coal Group Co., Ltd. Relying on high-quality coal resource endowments, the company's performance still shows strong resilience in an environment of fluctuating external coal prices. In the context of the expected transformation of “integration of coal and electricity,” the stability of the company's performance side is expected to be further strengthened.

Maintain a “buy” rating in conjunction with the company's 2024 three-quarter report. Based on the company's production and operation data for November, considering that the company's production and sales volume for 24 is expected to exceed expectations, the company's net profit for 24-26 was slightly raised by 21.493/24.311/25.154 billion yuan (the original value was 21.328/24.145/24.984 billion yuan). The current market capitalization corresponds to 24-26 PE of 11X, 9X, and 9X respectively. Because both China's Shenhua and the company are high-quality domestic thermal coal producers and have outstanding resource factor endowments, the two are comparable. According to iFind's unanimous expectations, China Shenhua's net profit for 24 was 60.003 billion yuan, which is 13 times the PE ratio corresponding to the current stock price. Maintain a “buy” rating.

Risk warning: Major changes in the energy structure; significant release of additional coal production capacity; production safety accidents.