[Core Conclusion] Based on model analysis, we expect the company's net profit to be 21.937 billion, 22.923 billion, 23.406 billion in 2024-2026, and EPS of 2.26, 2.36, and 2.41 yuan respectively, with year-on-year increases of 3.3%, 4.5%, and 2.1%. Consider the DDM valuation method and give the company a target price of 31 yuan/share. First coverage, giving a “buy” rating.

[Report Highlights] The market believes that the coal industry is a typical cyclical industrial products industry, and that industry sentiment will clearly change cyclically with macroeconomic fluctuations; it also believes that the company is a typical beta variety, and that performance and stock prices completely follow the rise and fall of the coal industry's prosperity. However, we believe that under the tight balance between supply and demand, it is expected that the spot purchase price center will remain in the position of 900-950 yuan/ton in 2024-2026; the company's performance is steady, and there is a high probability that it will continue to maintain high dividends in the future.

[Main logic]

Main logic 1: There is a tight balance between supply and demand, and long-term high and stable coal prices. Therefore, we expect that in 2024-2026, under the premise of full guarantee by the Electricity and Coal Association, the spot purchase price center will still maintain the position of 900-950 yuan/ton, and there is still a possibility that the highest price will reach a new high.

Main logic 2: The company is rich in resources and stable revenue capacity. The company has 18.141 billion tons of coal reserves and 10.441 billion tons of extractable reserves, and a mining period of more than 70 years. The company's coal resource reserves are among the highest among listed Chinese coal companies; the approved production capacity is 0.162 billion tons, and more than 95% of the production capacity of its mines is located in large-scale coal bases developed by the country's “13th Five-Year Plan”.

Main logic 3: stable profit, steady performance, and maintaining high dividends for a long time. Since its listing, the Shaanxi coal industry has accumulated 12 cash dividends, with an average dividend rate of 48.25%. The net profit dividend rate announced in 2023 exceeds 60%. By the end of the third quarter of 2024, undistributed profit reached 70.285 billion. It is expected that with the support of steady performance, future dividends will remain at a high level.

Risk warning: Economic growth falls short of expectations, production capacity investment exceeds expectations, imports exceed expectations, sudden coal mine accidents, company dividends fall short of expectations, etc.