Investors should refer to Golden麒麟 analyst reports for authoritative, professional, timely, and comprehensive analysis to uncover potential thematic opportunities! The company's future performance is deeply intertwined with the steel industry.
On January 27th, after market close, Shanxi Coking's (600740.SH) earnings forecast delivered a cold shock to the market: the company projected its 2025 net profit would plummet by 66.31% to 71.82% year-on-year, with non-recurring net profit also falling sharply by 79.36% to 85.43%, shrinking the profit scale to under 100 million yuan.
However, the market's reaction the following day was like a blazing fire. The stock opened higher on January 28th and climbed steadily, ultimately hitting the daily limit-up. It continued its upward trajectory on January 29th with another high open, briefly touching the limit-up again before closing with a substantial 7.95% gain, displaying explosive momentum that completely diverged from its fundamental performance.
Why did what should have been negative earnings news instead act as a catalyst igniting the stock price? What expectations is the market collectively betting on with this contrarian thinking? Is it a valuation recovery after all bad news is priced in, or an early wager on an industry cycle reversal? Welcome to today's in-depth investigation.
From a technical perspective, after enduring a continuous three-year decline followed by over a year of consolidation at low levels, a medium-to-long-term base structure appears to have formed. This foundation potentially sets the stage for a subsequent trend reversal.
As its name suggests, Shanxi Coking is a coking processing enterprise. Its primary product is metallurgical coke, with by-products including methanol, carbon black, and other chemical products. In the first half of 2025, coke products contributed nearly two-thirds of the company's revenue, representing its absolute primary income source.
The awkward reality, however, is that the gross profit margin for Shanxi Coking's coke business has declined for three consecutive years since 2022. By 2024, it had worsened to -24.06%, meaning the company incurred a direct loss of over 240 yuan for every ton of coke produced.
This trend showed some signs of reversal entering 2025, yet the gross profit margin for the coke business in the first half of the year remained deeply negative at -16.88%. Consequently, the overall毛利率 for the company's coking segment continued its downward path.
The primary reasons for the persistent losses in Shanxi Coking's coke business毛利率 are weak purchasing意愿 from the steel industry—impacted by policy-driven production cuts and持续疲软的 terminal demand—significantly enhanced buyer bargaining power, and, in certain periods, a notable increase in coal prices that could not be effectively passed through to customers. In 2025, for instance, influenced by the "crude steel output reduction" policy, the average domestic coke market price fell by 18% to 22% compared to the same period in 2024. While the price of high-quality coking coal, the main raw material, also declined, its drop was only 12% to 15%, far less than the decline in coke prices.
A mismatch between cost stickiness and price elasticity led to a sharp compression of the coke-to-coal price spread, rapidly pushing the industry's average profit per ton of coke from a state of marginal profit into deep losses. Simply put, coke prices are influenced by coal prices and are also deeply constrained by the景气度 of the downstream steel industry.
In 2022, despite the coke business reporting a negative gross margin, Shanxi Coking's net profit still reached a record high. This was primarily due to a substantial profit increase at China Coal Huajin Group Co., Ltd., a high-quality coking coal producer in which Shanxi Coking holds a stake. The investment income recognized on Shanxi Coking's statements that year was as high as 3.442 billion yuan.
Thereafter, investment income became the primary contributor to Shanxi Coking's profits during this period. However, the main customers for coking coal remain steel enterprises. Although coking coal producers possess significantly stronger bargaining power than coke producers, they are still unable to escape the influence of the industry cycle. The root cause of their profit decline lies with their downstream customers—steel enterprises—who themselves face shrinking demand and compressed profits, leading to reduced coking coal purchases, weaker bargaining power, and ultimately, this pressure being transmitted upstream to affect coal sales prices and profitability.
In summary, Shanxi Coking's stellar performance in 2022 was not derived from efficiency improvements in its coking process or breakthroughs in cost control. Instead, it was built on a triple tailwind of high coking coal prices, a favorable cycle in the steel industry, and exceptional performance from its investee company, China Coal Huajin Group Co., Ltd. Subsequently, all three of these factors have significantly reversed.
In a nutshell, the future trajectory of Shanxi Coking's performance is inextricably linked to the steel industry. Judging by the stock price movement, the market appears to be trading on precisely this expectation. As the primary downstream consumer of coke, the steel industry's crude steel output remains targeted for reduction under the "15th Five-Year Plan." In the short term, the疲软态势 in real estate investment is difficult to reverse, while the stimulating effects from infrastructure and manufacturing are still insufficient to fully offset the decline.
Comments