CSEC,China Shenhua(01088) 第一上海证券·2024-09-25 08:22Investment Rating - The report maintains a "Buy" rating for China Shenhua (1088) with a target price of HKD 40.45, indicating a potential upside of 19% from the current price of HKD 34.10 [1]. Core Views - The integrated operational layout of the company smooths out cyclical fluctuations, showcasing its stability as a leading player in the industry [1]. - The company's performance in the first half of the year met expectations, with revenue of CNY 168.1 billion, a slight decrease of 0.8% year-on-year, while net profit attributable to shareholders reached CNY 32.8 billion, reflecting a year-on-year increase of 13.6% [1]. - The coal business demonstrated profitability stability under price pressure, with production reaching 163 million tons, a year-on-year increase of 1.6% [1]. Financial Performance Summary - Revenue for the first half of 2024 was CNY 168.1 billion, down 0.8% year-on-year; net profit attributable to shareholders was CNY 32.8 billion, up 13.6% year-on-year [1]. - The coal segment's tax-adjusted profit decreased by 17.2% due to rising labor costs, with unit production costs at CNY 172 per ton, an increase of 3.2% year-on-year [1]. - The company achieved a sales volume of 134.3 million tons in the coal business, a decrease of 2.3% year-on-year, while the average price for long-term contracts remained stable, with a 2% year-on-year decline [1]. Operational Insights - The company's power generation segment generated revenue of CNY 44.4 billion, a year-on-year increase of 0.4%, although pre-tax profit decreased by 8.9% due to lower utilization hours and selling prices [1]. - The integrated coal and power operation model significantly alleviated profit pressure during coal price fluctuations, with expectations for stable profit levels in the long term [1]. - The company plans to release additional production capacity from new projects starting in 2028, contributing an estimated annual capacity of 30 million tons once fully operational [1]. Market Outlook - The report anticipates that the company's integrated operational model will continue to reflect strong profitability, with stable profit levels supported by long-term coal sales contracts and recovery in power generation [1]. - The forecast for net profit attributable to shareholders for 2024-2026 has been adjusted to CNY 60.9 billion, CNY 61.4 billion, and CNY 61.9 billion respectively [1].