East Money Securities: Coal Sector Shows Q3 Earnings Recovery, Reiterates Upward Trend Opportunities

Stock News11-25

East Money Securities released a research report stating that, looking ahead to 2026, the coal price floor has been further solidified amid ongoing "anti-involution" policy developments and the National Energy Administration's capacity verification measures. With limited growth in new coal mine capacity, the sector is expected to enter a medium-to-long-term upward cycle. The report highlights investment opportunities in: 1. High-dividend leaders benefiting from reinforced coal price floors and those with potential for increased payout ratios. 2. Thermal coal players poised for valuation recovery as coal prices gradually rise. 3. Coking coal companies likely to gain from resource value realization and steel industry restructuring. 4. Coal machinery firms set to benefit from capacity reserve policies, safety upgrades, and Belt and Road initiatives.

Key insights: - Industry profits for Q1-Q3 2025 totaled CNY 224.6 billion, down 51.1% YoY, with Q3 profits rebounding to CNY 65/ton (+13% QoQ from Q2’s CNY 57/ton). Monthly profits bottomed in July (CNY 46/ton) before improving to CNY 70/ton and CNY 76/ton in August and September. - Loss-making firms increased, but the loss ratio improved to 56% in September (vs. +8.4 ppts YoY, -1 ppt vs. June 2025). - Capex growth slowed to 9.3% YoY (vs. 14.4% in H1 2025), while listed firms’ capex rose 11% YoY to CNY 115.3 billion. Sector debt hit a record CNY 4.83 trillion, with a 60% debt-to-asset ratio. - Q3 net profit reached CNY 31.2 billion (+22% QoQ), surpassing Q1’s CNY 29.7 billion, as coal prices recovered post-July. Cost-cutting efforts and seasonal demand are expected to drive further Q4 growth. - Cash flow metrics improved, with Q3 operating cash flow down 12.7% YoY (narrowing from H1’s 23.4% decline). Top thermal coal producers like Shaanxi Coal, China Coal Energy, and China Shenhua demonstrated resilience, posting Q3 net profit growth of 79.1%, 28.3%, and 13.5% QoQ, respectively.

Risks include weaker downstream demand, supply/price stabilization policies, and geopolitical impacts on industrial exports.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap
Leave a comment