Event: On October 25, 2024, the company released its 2024 three-quarter report. In the first three quarters of 2024, the company achieved operating income of 253.899 billion yuan, a year-on-year increase of 0.57%; net profit to mother of 460.74 yuan, a year-on-year decrease of 4.55%; net profit after deducting non-return to mother of 46.034 billion yuan, a year-on-year decrease of 3.72%. Under international corporate accounting standards, the company achieved net profit of 50.569 billion yuan in the first three quarters of 2024, a year-on-year decrease of 3.68%.

24Q3 profits both increased month-on-month, and four-fee rates declined month-on-month. In the third quarter of 2024, the company achieved operating income of 85.821 billion yuan, +3.37%/+6.70% YoY; net profit to mother of 16.57 billion yuan, +10.54%/+21.66% YoY; net profit without return to mother 16.553 billion yuan, +11.54%/+27.13% YoY. Under international corporate accounting standards, 24Q3 achieved net profit of 17.798 billion yuan to mother, +13.80%/+18.57% YoY. The 24Q3 four-month fee increased by 0.091 billion yuan, and the rate was -0.14pct month-on-month to 3.75%.

Production and sales of 24Q1-3 coal increased year-on-year, the cost reduction was less than the selling price, and gross margin declined. 1) Commercial coal:

24Q1-3 commercial coal production was 0.244 billion tons, +1.0% year over year; coal sales volume was 0.345 billion tons, +3.8% year over year; comprehensive sales price was 564 yuan/ton, -3.3% year over year, of which annual Changxie/monthly Changxie/spot/Kengkou direct sales price was 492/713/610/298 yuan/ton, -2.6%/-12.8%/-1.8%/-9.1%, sales volume accounting for 53.2%/32.4%/9.0%/5.4% year on year 8.5/-1.8/+0.3pct 2) Self-produced coal: 24Q1-3 sold 0.245 billion tons of self-produced coal, +0.9%; the sales price of a ton of coal was 531 yuan/ton, -2.8%; the sales cost of a ton of coal was 300 yuan/ton, -1.7%; the unit production cost was 186.3 yuan/ton, -2.5% year-on-year, mainly due to a 5.3% and 8.9% year-on-year decrease in raw materials and repair costs. 3) Outsourced coal: 24Q1-3 sold 0.1 billion tons of outsourced coal, +11.8% year over year, and gross profit margin fell 0.1 pct to 2.0% year over year. The gross profit margin of the 24Q1-3 coal business was 29.3%, down 1.2 pct year on year, achieving total profit of 41.104 billion yuan, down 7.5% year on year.

In the 24Q3 coal year, Changxie's sales price rose month-on-month, the spot price sales ratio increased month-on-month, costs fell sharply month-on-month, and gross margin increased month-on-month. 1) Commercial coal: 24Q3 commercial coal production 81.2 million tons, -0.1%/-0.9%; coal sales volume 0.116 billion tons, +0.9%/+2.7% YoY; comprehensive sales price 559 yuan/ton, +1.9%/+0.1% YoY, of which annual Changxie/monthly Changxie/spot/Kengkou direct sales price 496/691/596/269 yuan/ton/-3.1%, YoY -3.3%/-14.3%/+8.6%/-4.7% 19.8%/-12.5%, accounting for -8.4/+1.8/+6.8/-0.2pct of sales volume compared to the previous month. 2) Self-produced coal:

24Q3 sold 82.1 million tons of self-produced coal, -1.6%/-0.5%; tons of coal sold for 528 yuan/ton, +1.3%/-0.7% YoY; sales cost of tons of coal was 283 yuan/ton, -10.8%/-11.5% YoY; gross profit margin 46.3%, +7.3/+6.5pct YoY. 3) Outsourced coal: 24Q3 sold 33.5 million tons of outsourced coal, +7.4%/+11.3% YoY; gross profit margin 2.2%, -0.4/+0.7pct YoY. The gross profit margin of the 24Q3 coal business was 31.2%, +3.7/+3.5pct, achieving a total profit of 15.065 billion yuan, an increase of 19.3% over the same period last year.

The amount of electricity sold in 24Q3 increased month-on-month, and gross margin increased month-on-month. 24Q1-3, the company's total power generation capacity was 168.14 billion kilowatt-hours, +7.6% year over year; total sales volume was 158.27 billion kilowatt-hours, +7.8% year over year. By the end of the third quarter, the company's total installed capacity reached 44,939 MW, including 43,244 MW of coal-fired power generation and 117 MW of PV installed capacity added in 24Q3. 24Q1-3's electricity sales price was 401 yuan/megawatt-hour, -3.6% year over year; average electricity sales cost was 356.2 yuan/megawatt-hour, -0.7% year over year; average unit utilization hours were 3,745 hours, -120 hours year over year, a decrease of 3.1%; gross profit margin was 15.9%, -2.0pct year on year, achieving total profit of 8.435 billion yuan, or -12.7% year on year. 24Q3, the company's power generation capacity was 64.1 billion kilowatt-hours, +14.4%/+31.6% month-on-month, 60.38 billion kilowatt-hours, +14.9%/+32.0%; the sales price of electricity was 395 yuan/megawatt-hour, -4.4% year on year; the average number of hours used by the unit was 1,428 hours, +42 hours year on year, an increase of 3.0%; gross profit margin of 15.8%, -4.1/+0.9pct month-on-month, achieved total profit of 3.184 billion yuan, compared to the previous month- 6.81/+1.121 billion yuan, growth rate -17.6%/+54.3%. In October 2024, the company's Huizhou Phase II gas cogeneration unit project was officially put into commercial operation. The company's installed capacity was increased by 1000 MW, and Q4 power generation is expected to continue to increase.

The profitability of the transportation business increased sequentially in 24Q3. 1) Railway: In 24Q3, the company's own railway turnover was 73.4 billion ton/km, -4.3%/-7.6%; gross profit margin was 40.2%, +1.1/+3.5pct, achieving total profit of 3.234 billion yuan, -6.9%/+2.8% year-on-month. 2) Ports:

In 24Q3, the company's Huanghua Port loading volume was 50.2 million tons, -7.0%/-9.5%; the Tianjin coal terminal had a loading capacity of 11 million tons, +3.8%/-3.5% year over month; gross profit margin was 43.8%, -5.1/+3.8pct, achieving total profit of 0.589 billion yuan, -12.4%/+5.7% YoY. 3) Shipping: In 24Q3, the company's shipping cargo volume was 34.1 million tons, -9.5%/+7.2%; shipping turnover was 38.9 billion tons and nautical miles, -2.7%/+0.5% month-on-month; gross profit margin was 11.6%, +9.0/+2.8pct, achieving a total profit of 0.119 billion yuan, which reversed losses year on year and -0.8% month on month.

In 24Q3, coal chemical profits improved year on month, and gross margin declined year on month. In 24Q3, the company sold 0.093 million tons of polyethylene, +5.5%/+57.8% year on year; sold 0.088 million tons of polypropylene, +0.8%/+55.8% year over year. The significant month-on-month increase in 24Q3 sales was mainly due to the planned maintenance of coal-to-olefin production equipment 24Q2, and production resumed on May 19. The gross profit margin of the 24Q3 coal chemical business was 6.7%, -3.2/-1.1 pct, achieving a total profit of 0.021 billion yuan, +90.9% year-on-year, reversing losses from month to month.

Investment advice: The company's coal production can be expected to increase in the medium term, and the amount of electricity sold will continue to grow. We expect the company's net profit to be 60.52/62.537/65.274 billion yuan in 2024-2026, corresponding EPS of 3.05/3.15/3.29 yuan/share, respectively, and the PE corresponding to October 25, 2024 will be 13/13/12 times, respectively. Maintain a “Recommended” rating.

Risk warning: Coal prices have dropped sharply; demand for thermal power falls short of expectations; project construction is slower than expected.