Event comment

The company re-approved production capacity and Gengcun mine production and rectification, coal production and sales fell sharply compared with the same period last year.

In the first half of the year, the company's commercial coal output was 5.7576 million tons, down 29.67% from the same period last year; commercial coal sales were 5.8004 million tons, down 21.28% from the same period last year. In the first half of the year, the company's production and sales volume completed 34% of the annual plan, mainly due to the approved production capacity of all production mines with new compliance production capacity, and the main mine Gengcun mine shutdown due to accident rectification. In the second quarter, the company's commercial coal production and sales volume were 361.08 and 3.8107 million tons respectively, up 68.19% and 91.52% respectively from the previous quarter.

The price of coal is weak and the cost is rigid, and the gross profit of per ton of coal turns to a loss in the first half of the year. In the first half of the year, the company's revenue per ton of coal was 199.66 yuan, down 22.05% from the same period last year; the cost per ton of coal was 238.65 yuan, up 13.85% from the same period last year; the company's cost was rigid, and its gross profit per ton of coal turned to-38.99 yuan in the first half, down 83.53 yuan from the same period last year. The revenue per ton of coal in the second quarter was 192.13 yuan, down 10.25% from the previous quarter; the cost per ton of coal was 216.11 yuan, down 23.32% from the previous quarter; and the gross profit per ton of coal decreased by 43.76 yuan to-23.98 yuan from the previous quarter.

During the period, the expenses were relatively stable, and the financial expenses increased compared with the same period last year. In the first half of the year, the company's expenses totaled 457 million yuan, down 1.28% from the same period last year, of which sales expenses and management expenses decreased by 8.98% and 3.26% respectively compared with the same period last year. The decline in sales expenses was mainly due to the decrease in staff and workers' salaries; financial expenses increased by 107.25% compared with the same period last year, mainly due to the decrease in interest income.

Production and sales rose in the second quarter, subject to expenses and provision of losses, performance increased losses compared with the previous quarter. Benefiting from the pick-up in production and sales in the second quarter, the company's gross profit reduced its loss compared with the previous quarter, but its performance increased by 15 million yuan to-487 million yuan compared with the previous quarter due to the increase in expenses and the loss of inventory and bad debts. The company announced that production in the western area of Gengcun Coal Mine has resumed at present, and production may pick up month-on-month in the third quarter.

Pay attention to the progress of local supply-side reform and maintain the "overweight" rating. We forecast that the EPS of the company from 2016 to 2018 will be-0.47,0.39 and-0.38 yuan respectively, maintaining the "overweight" rating.

Risk hint: a sharp decline in macroeconomic and lower-than-expected supply-side reforms