Affected by the mining accident, the first-quarter operating data fell sharply: Hengding recently released first-quarter operating data, selling 168000 tons of clean coal in the first quarter, down 49% from the same period last year and 16% from the previous month; the average price excluding tax was 1111 yuan, down 16% from the same period last year and up 13% from the previous year.

In terms of raw coal production, Panzhihua and Yunnan mining areas both stopped production in the first quarter, only Guizhou mining area produced 302000 tons of raw coal, and the total raw coal output decreased by 69% compared with the same period last year. The company also announced the resumption of production in the suspended mining areas. Eight of the 10 production mines in Guizhou returned to production, two more than at the beginning of the year.

All 9 mines in Fuyuan County, Yunnan Province have resumed production. Only one of the five mining areas has returned to production, and the rest of the mining areas have not been expected to resume production. The company's raw coal production in the first quarter is likely to be significantly lower than market expectations. Two of the five mining areas in Panzhihua have received notice of resumption of production. A liquidity crisis is imminent: according to the company's previously released annual report, the company's short-term debt is growing rapidly, with current liabilities reaching 8.07 billion yuan, up 170% from a year earlier. This is mainly because a total of 3.31 billion of convertible bonds and high-interest bills must be repaid within one year. The company's current assets are only 3.35 billion yuan and its cash is only 1.55 billion yuan. The corporate debt ratio rose from 51% to 61%, while the net debt ratio rose from 74% to 120%. We believe that unless the company finds sufficient liquidity through trust or other channels within this year, there will be a greater risk to the company's liquidity. At the same time, the company announced that as it takes additional time to compile and implement the disclosure information required by the listing rules, especially the information on reserves and resources, the sending date of the annual report will be further postponed.

Maintain the "reduction" rating: because (1) the company's resumption of production is lower than expected, (2) the company's interest-bearing liabilities are higher than expected, and (3) the liquidity risk is more prominent. We do not think the market has a very full understanding of the three major risks of the company. Keep the "reduction" rating and profit forecast unchanged.

The main risk comes from the higher-than-expected rise in coking coal prices.