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Caixin on October 30 (Reporter Liu Yue): After Shaanxi Energy released its third-quarter report yesterday evening, the third-quarter reports of the four major coal giants with market values exceeding one trillion have all been disclosed. Since the beginning of this year, as coal prices have fallen, the performance of listed coal companies has generally declined, but there has been differentiation in the third quarter performance: the top player in coal, China Shenhua (601088.SH), saw a double increase in net profit in Q3 on both a year-on-year and quarter-on-quarter basis; China Coal Energy (601898.SH) and Yankuang Energy (600188.SH) both achieved quarterly growth in net profit on a quarterly basis; Shaanxi Coal Industry (601225.SH), despite a decrease in net profit in Q3 on a quarterly basis, showed outstanding performance on a year-on-year basis.

Regarding the future trend of coal prices, industry insiders generally believe that there is a possibility of a rebound after hitting bottom, but the extent of the increase is limited. Some analysts told Caixin reporters that they expect winter electricity industry consumption to show positive growth compared to the previous period, coal prices to remain relatively stable, and only fluctuate within a range.

Net profits generally declined in the first three quarters, with differentiated performance in Q3.

In the first three quarters of this year, the performance of the 'four coal giants' generally declined. Apart from a slight increase in revenue for China Shenhua compared to the same period last year, the other three coal giants, Shaanxi Coal Industry, China Coal Energy, and Yankuang Energy, experienced year-on-year declines in both revenue and net profit.

(Data Source: Listed Company Financial Reports, with table compiled by Caixin News)

Specifically, with a total market cap exceeding 800 billion yuan, China Shenhua's net profit for the first three quarters was 46.074 billion yuan, a year-on-year decrease of 4.5%, with revenue of 253.899 billion yuan, a slight increase of 0.6%. Yankuang Energy saw the largest decline in performance, with revenue and net profit for the first three quarters at 106.633 billion yuan and 11.405 billion yuan, both decreasing by over 20% year-on-year. Shaanxi Coal Industry and China Coal Energy had attributable net profits of 15.943 billion yuan and 14.614 billion yuan, respectively, for the first three quarters, showing year-on-year decreases of 1.46% and 12.4%.

The performance of coal companies has declined year-on-year, mainly due to the fall in coal prices during the year. Since 2024, coal prices have shown an overall trend of fluctuating downward, stabilizing and rebounding since September. China Coal Energy stated that due to insufficient domestic effective demand, some industries are experiencing overcapacity, and weak social expectations, macro factors have impacted the slight year-on-year decrease in coal demand in the first half of the year, with inventories at various stages slightly increasing, leading to overall weak volatility in coal prices.

Looking at net income for a single quarter, except for Shaanxi Coal Industry, the other three coal giants China Shenhua, China Coal Energy, and Yankuang Energy all achieved growth on a quarter-on-quarter basis. Among them, China Shenhua's Q3 performance doubled on both quarter-on-quarter and year-on-year basis, while Shaanxi Coal Industry's Q3 net income decreased on a quarter-on-quarter basis but performed well year-on-year.

(Data Source: Listed Company Financial Reports, with table compiled by Caixin News)

Industry experts believe that China Shenhua's coal sector performance exceeded expectations, with reduced costs boosting profits. China Shenhua is a large coal and electrical utilities company with a complete network of railroads, ports, and shipping, achieving integrated operations from coal mining to electricity production and coal chemical industry. Data shows that due to the decrease in production costs such as raw materials and repair fees, China Shenhua's unit production cost of self-produced coal in the first three quarters dropped from 191 yuan/ton in the same period last year to 186.3 yuan/ton, a decrease of 2.5%. In terms of production and sales, in the third quarter alone, the company achieved a production volume of 0.081 billion tons of commercial coal, a 0.1% year-on-year decrease and a 0.9% quarter-on-quarter decrease, with coal sales reaching 0.116 billion tons, a 0.9% year-on-year increase and a 2.7% quarter-on-quarter increase.

Although Shaanxi Coal Industry's Q3 net income decreased on a quarter-on-quarter basis, its performance year-on-year stood out with a significant increase of 17.1%. Financial data shows that the high year-on-year increase in Q3 net income was mainly influenced by fair value change income, with the project amounting to -1.072 billion yuan in Q3 2023 and 0.188 billion yuan this year. In terms of production and sales, the company saw a slight decline in coal production and trade coal sales quarter-on-quarter in Q3. Production in Q3 was 41.37 million tons, a 7.97% year-on-year decrease, with self-produced coal sales at 42.6 million tons, a quarter-on-quarter increase of +0.29%, and trade coal sales at 21.81 million tons, a quarter-on-quarter decrease of -20.97%.

In terms of sales net margin, Choice data shows that China Shenhua and Shaanxi Coal Industry both have sales net margins exceeding 20%, reaching 22.33% and 21.3% respectively in Q3, while Yankuang Energy had a sales net margin of 16.59% and China Coal Energy had a comparatively lower sales net margin of 13.11% in the same period.

Industry insiders predict that coal prices are expected to rebound after hitting bottom, but the extent of the rise is limited.

Coal, as the 'ballast stone' of China's energy supply, plays a crucial role in winter heating and supply security. According to data released by the China Coal Industry Association, from January to September this year, the output of raw coal in large-scale industrial enterprises reached 3.48 billion tons, a year-on-year increase of 0.6%; imported coal reached 0.39 billion tons, an increase of 11.9% year-on-year.

On the demand side, analysts expect industrial and heating electricity demand to be relatively strong in the fourth quarter, with electricity consumption in the winter showing positive growth on a month-on-month basis.

Data shows that in September, the output of raw coal in large-scale industries was 0.41 billion tons, a year-on-year increase of 4.4%, with the growth rate accelerating by 1.6 percentage points compared to August. Zhang Wenwen, a coal analyst at the Shanghai Ganglian E-Commerce Holdings, told cailiannews.com that in terms of thermal power, with the temperature dropping in October, some northern regions officially entered the heating season, and heating areas will all enter the heating phase from November to December. At the same time, the expectation of a colder winter in the northern region due to La Niña will lead to a continued rise in civilian electricity load and a seasonal increase in civilian electricity demand. For non-electricity sectors, the recent intensive introduction of economic stimulus policies may stimulate industrial replenishment demand. Cement, steel, and chemical non-electric terminal production are expected to resume or remain at high levels. It is expected that industrial electricity demand in the fourth quarter will increase compared to the third quarter.

Regarding the winter coal storage market situation, Zhang Wenwen stated that with the arrival of strong cold weather in the north in October, heating started in Northeast and Northwest China. The demand for 'peak winter' will gradually be released, and there is active transportation of coal from the long-term supply agreements at production sites. Currently, the inventories at CNI Bohai Index ports and coastal power plants are sufficient. However, due to the impact of long-term supply agreements and imported coal supplements, the enthusiasm for coal procurement in the northern regions is low, limiting the incremental market coal demand.

Concerning the future trend of coal prices, the industry generally believes that thermal coal prices are expected to rebound after grinding near the bottom, but the extent of the increase is limited. Yankuang Energy mentioned in September during institutional research that domestic and international coal prices are expected to remain at relatively high historical levels in the second half of the year, with the fluctuation range narrowing.

The aforementioned analysts told cailiannews.com that in October, thermal coal prices stalled and fell back. With the departure of high temperatures, thermal coal entered the seasonal off-peak coal consumption period, resulting in passive coal stacking at power plants and a subdued market coal demand. Moving into November will mark the beginning of the winter coal reserve phase, coupled with the rebound in international coal prices, providing a bottom support for domestic coal prices. However, the current high inventories at ports and power plants will restrain the extent of coal price increases. In the short term, terminals will mainly focus on replenishing stocks through long-term agreements, with minimal purchases of market coal at the price bottom. It is anticipated that coal prices will decline first and then rise, but the extent of the increase is limited.