After the third quarter report, the annual profit and dividend expectations of the coal sector gradually became clearer, combined with favorable factors at macroeconomic and market levels, the performance of the leading companies in the sector that are weighted in the funds are favorable, and the bank believes the sector is expected to usher in a new round of growth.
Zhitong Finance APP learned that CITIC Securities issued a research report stating that the scale of heavyweight coal stocks in Q3 2024 decreased compared to the previous quarter, the scale of heavyweight active equity funds decreased significantly compared to the previous quarter, with a 0.23% underweight of market cap. In the third quarter of this year, the thermal coal prices fluctuated slightly, while the average price of coking coal continued to decline, combined with the increase in market risk appetite, the sector experienced a significant adjustment in October. However, after the third quarter report, the sector's full-year profit and dividend expectations gradually became clearer, combined with favorable factors at macroeconomic and market levels, the performance of the leading companies in the sector that are weighted in the funds are favorable, and the bank believes the sector is expected to usher in a new round of growth.
The main points of the Citic Securities research report are as follows:
The scale of heavyweight coal stocks held by funds in Q3 2024 decreased compared to the previous quarter, with a slight increase in concentration of positions.
In Q3 2024, the total market cap of heavyweight coal industry stocks held by funds was 31.861 billion yuan, a decrease of 16.15% compared to the previous quarter, with funds holding positions accounting for 1.83% of the coal industry's market cap, a decrease of 0.39 percentage points compared to Q2 2024; the market cap of heavyweight coal industry stocks held by funds accounted for 1.11% of the total market cap of funds' heavyweight stocks, a decrease of 0.46 percentage points compared to the previous quarter, and a 0.23 percentage point underweight compared to the standard allocation ratio of the coal industry. The total market cap of the top 10 heavyweight coal industry stocks held by public funds in Q3 2024 was 18.163 billion yuan, a decrease of 14.58% from Q2 2024; accounting for 57.01% of the total market cap of funds' heavyweight coal industry stocks, an increase of 1.05 percentage points compared to Q2 2024, showing an increased concentration of public funds' holdings in coal stocks in Q3 2024.
Active equity funds have all reduced their allocations to the coal sector, while flexible allocation funds have increased their industry holdings.
In Q3 2024, the total market cap of heavyweight coal industry stocks held by active equity funds was 19 billion yuan, a decrease of 15.97% from Q2 2024, accounting for 59.73% of the total market cap of funds' heavyweight coal industry stocks. Hybrid equity funds: the total market cap of heavyweight coal industry stocks held was 10.75 billion yuan, a decrease of 16.58% from Q2 2024; flexible allocation funds: the total market cap of heavyweight coal industry stocks held was 6.399 billion yuan, a decrease of 10.27% from Q2 2024, accounting for 20.08% of the total market cap of funds' heavyweight coal industry stocks, an increase of 1.32 percentage points compared to the previous quarter; general stock funds: the total market cap of heavyweight coal industry stocks held was 1.883 billion yuan, a decrease of 28.46% from Q2 2024.
The significant increase in the heavyweight market cap ratio, with individual stocks mostly undervalued or expecting marginal improvement in companies.
In 2024 Q3, the top 5 stocks with the highest increase in fund heavyweight market cap are Huaibei Mining Holdings (600985.SH) 0.443 billion yuan, Pingdingshan Tianan Coal Mining (0.217 billion yuan), Beijing Haohua Energy Resource (0.07 billion yuan), Wintime Energy (0.046 billion yuan), and Shanxi Coal International Energy Group (0.032 billion yuan), with valuations in the coal sector mostly undervalued or seeing some improvement in the interim report. The top 5 stocks with the highest decrease in fund heavyweight market cap are China Shenhua Energy (-1.777 billion yuan), Yankuang Energy (-0.56 billion yuan), Shaanxi Coal Industry (-0.466 billion yuan), Shanxi Coking Coal Energy Group (000983.SZ) -0.453 billion yuan, and Shanxi Lu'an Environmental Energy Dev.Co.,Ltd (-0.306 billion yuan). The top 5 stocks in fund heavyweight market cap in Q3 are: Shaanxi Coal Industry (601225.SH) 3.857 billion yuan, China Shenhua Energy (601088.SH) 3.813 billion yuan, China Coal Energy (601898.SH) 2.055 billion yuan, Huaibei Mining Holdings (1.983 billion yuan), and China Coal Xinji Energy (1.866 billion yuan).
Investment strategy: With continued policy expectations overlapping, the sector is expected to enter a new round of uptrend.
Since October, with the change in market style and the rise in market risk preferences, the coal sector has underperformed the large cap market. Recently, with the return of dividend style, there has been a significant increase in sector attention. Fundamentally, the bottom line of coal prices for the year is now clearer, with the completion of the 2024 third quarter reports of listed companies, and profit and dividend expectations for the whole year are also becoming clearer; Macro policies continue to overlap, helping to stabilize medium to long-term coal price expectations. In addition, the introduction of tools for increasing stakes and buybacks as well as actively guiding long-term funds into the market also contribute to the sector's trend development.
Investment strategy:
Risks include economic growth falling below expectations, further impacting coal demand and prices; risks of additional supply brought about by subsequent supply increase policies affecting coal prices; and risks of systemic decline in overseas energy prices.
