Guotai Haitong Coal Industry 2025 H1 Interim Report Summary: Sector pessimism exhausted, industry leader once again demonstrates leading capabilities.

Guotai Haitong released a summary of the interim report for the coal industry in the first half of 2025, stating that the overall performance of the industry leaders in 2025H1 exceeded expectations, judging that 2025H1 is the bottom for the next 3-5 years. The price of coal in H1 continued to fall under pressure testing, and the industry's profitability continued to decline. By 2025Q2, the sector faced the greatest pressure, with downward risks being released. The most important factor affecting industry performance is still the price, and overall cost control in the sector has been effective. Compared to 2024, the financial indicators in the first half of 2025 showed a slight decline, with the industry leaders still showing resilience in the background of declining performance. Guotai Haitong's main points are as follows: Guotai Haitong believes that the overall performance of industry leaders in 2025H1 exceeded expectations, judging that 2025H1 is the bottom for the next 3-5 years. In reviewing 2025H1, with regards to the coal industry: 1) On the demand side, in 2025H1, thermal power generation accounted for 64.8% of electricity generation, still the main source of power generation. The total electricity consumption in 2025H1 was 48 trillion kilowatt-hours (an increase of 3.7% compared to the previous year). For the full year of 2025, electricity generation was 45 trillion kilowatt-hours (an increase of 2.3% compared to the previous year). Thermal power generation in 2025H1 was 2.94 trillion kWh, a decrease of 2.4% compared to the previous year. By 2025Q2, the growth rate of total electricity consumption gradually increased, and thermal power generation growth turned positive. In 2025Q2, total electricity consumption was 24.6 trillion kWh, an increase of 6% compared to the previous year. 2) On the supply side, affected by low base figures, raw coal production in 2025H1 was 2.4 billion tons, an increase of 5.4% compared to the previous year, but decreased by 80 million tons from H2 2024, indicating the industry's voluntary production reduction behavior has emerged. 3) Regarding coal prices, the average price of thermal coal (Q5500) at Huanghua Port in 2025 was 685.9 yuan per ton, a decrease of 22.4% compared to the previous year. In Q1, the average price was 730.7 yuan per ton, a decrease of 19.86% year-on-year; in Q2, the average price was 641.7 yuan per ton, a decrease of 25.3% year-on-year. The average price of coking coal at Jingtang Port in 2025H1 was 1377.7 yuan per ton, a decrease of 38.5% year-on-year. In Q1, the average price was 1440.86 yuan per ton, a decrease of 42.27% year-on-year; in Q2, the average price was 1315.3 yuan per ton, a decrease of 37.2% year-on-year. The price of coal continued to fall during the stress testing period in 2025H1, and the industry's profitability continued to decline, with the sector facing the greatest pressure in 2025Q2, releasing downward risks. The coal sector (Shenwan) had a total revenue of 578.1 billion yuan in 2025H1, a decrease of 18.6% year-on-year, achieving a net profit attributable to shareholders of 54.2 billion yuan, a decrease of 31.3% year-on-year. In 2025Q2, the coal sector (Shenwan) had a revenue of 293.5 billion yuan, a decrease of 16.5% year-on-year, with a quarter-on-quarter increase of 3.1%; achieved a net profit attributable to shareholders of 24.2 billion yuan, a decrease of 37% year-on-year, and a decrease of 19.7% quarter-on-quarter. In the background of the industry's average profit declining by 30% in Q2 2025, leading companies such as China Shenhua Energy, China Coal Energy, and Yankuang Energy Group outperformed the industry, continuing to outperform the industry. Price remains the most important factor affecting industry performance, and overall cost control in the sector is effective. In 2025H1, the average selling price of self-produced coal for the 13 listed A-share companies was 520 yuan per ton, a decrease of 22.8% compared to 2024, with price decline still being the core factor leading to the decline in industry performance. At the same time, benefiting from various coal enterprises intensifying cost controls, the cost per ton of coal in 2025H1 was 345 yuan, a decrease of 19.6% compared to 2024, and the gross margin per ton of coal in 2025H1 was 175 yuan, a decrease of 28.6% compared to 2024. With coal prices continuing to decline in 2025Q2, the decline in gross profit per ton narrowed significantly due to the increased cost control by listed coal companies, and it was significantly better than the decline in coal prices. Compared to 2024, the financial indicators in the first half of 2025 showed a slight decline, with the industry leaders still showing resilience in the background of declining performance. In the context of a decline in operating cash flow from 2024 to 2025H1, expenses remained stable compared to the same period in 2024 but the expense ratio increased slightly. The operating net cash flow of the coal sector in 2025H1 decreased significantly compared to the previous year. Among the sub-sectors, the operating net cash flow of thermal coal was relatively good in 2025H1. The debt ratio of the coal industry continued to improve. Benefiting from the high industry prosperity, corporate profitability has increased, leading to a continuous optimization of asset structure, with the debt ratio of the coal sector decreasing from 49.2% in 2020 to 47.2% in the first half of 2025. Risk warning: Macroeconomic growth is lower than expected, large-scale imports of coal, and unexpected increase in supply.