CITIC SEC's coal first-quarter performance outlook: significant year-on-year decline, bottom expectations gradually clearer

CITIC SEC released a research report stating that although the overall performance of the sector in the first quarter has generally declined, coal prices are currently in the process of finding a bottom, with cost support at the bottom of the coal price. It is expected that the pressure on coal prices will be relieved in Q2, and the sector's performance is also expected to hit bottom in Q2. Looking at the whole year, the dividend level of leading companies remains attractive. With the active guidance of policies attracting long-term funds into the market, and the strengthening of market value management by leading companies in the sector, coupled with the reinforcement of dividend styles, it is expected that the leading companies in the sector will continue to generate excess returns. CITIC SEC's main views are as follows: The average price of various types of coal continued to decline year-on-year and quarter-on-quarter in Q1 2025, with a year-on-year decrease of more than 20%. In the first quarter of 2025, the average price of various types of coal decreased by an average of about 15% quarter-on-quarter and about 21% year-on-year. The market price of Qinhuangdao 5500 kcal thermal coal, which serves as the benchmark for thermal coal, was around 730 yuan per ton on average, a decrease of about 19% year-on-year. However, the corresponding annual contract coal price only decreased by 2.6% year-on-year. Coking coal prices saw the largest decrease, with the market price in the first quarter falling by over 40% year-on-year, while the contract price for coking coal fell by 25% year-on-year. Prices for anthracite coal saw the smallest decline, with an average year-on-year decrease of about 4%, mainly due to the lower base in the same period. Net profits of the sample listed companies tracked in Q1 of 2025 declined by about 26% year-on-year, or lower than the industry average decrease. According to data from the National Bureau of Statistics, in the first two months of 2025, the total profits of coal mining and washing enterprises above a certain scale amounted to 50.66 billion yuan, a decrease of 47.3% year-on-year. It is expected that the sample listed companies in the coal mining sector will show a decrease in performance year-on-year in Q1 of 2025, with a total net profit decline of about 26%. The net profits of major companies in the thermal coal/metallurgical coal/anthracite coal sector are expected to decrease by -22%/-60%/-35% year-on-year. Leading thermal coal companies are expected to have a slower decline in performance due to a high proportion of annual contracts and a smaller year-on-year decline in contract prices, resulting in a smaller decline in the performance of the thermal coal sector; coking coal companies are expected to have the largest decline in performance due to the fastest year-on-year decline in coal prices. Short-term fundamental outlook: Supply pressures may be easing, and the outlook for the bottom of coal prices is expected to become clearer. Since the beginning of this year, demand for thermal power has been weak, and supply has accelerated year-on-year, leading to a exacerbation of the industry's oversupply situation and a rapid decline in coal prices after the Spring Festival. Currently, with initial cost support, the rate of decline has significantly slowed down. The widening premium for imported medium- and low-calorific coal, coupled with the gradual suppression of imports in the short term, is expected to gradually alleviate industry supply pressures. Thermal coal prices are also expected to approach the bottom and may see a new round of rebound in the later part of Q2. Improved demand for coking coal is expected to improve with the continuous growth of molten iron production, and prices are expected to emerge from the bottom in the short term. With the expectation that coal prices will gradually bottom out, industry pessimism may effectively be alleviated. Risk factors: Macroeconomic fluctuations that affect coal demand and prices; relaxed supervision leading to increased supply and pressure on coal prices; systematic decline in overseas energy prices leading to increased coal imports and pressure on domestic coal prices.