2024 H-share results in line with our expectations

China Coal Energy announced its 2024 results: Net profit attributable to shareholders fell 1.1% YoY to Rmb19.3bn and recurring attributable net profit fell 1.3% YoY to Rmb19.1bn for A-shares, beating our expectations. Attributable net profit fell 10.0% YoY to Rmb18.2bn for H-shares, in line with our expectations. We attribute the earnings gap between A- and H- shares to differences in domestic and overseas accounting standards, including special reserves and related deferred tax adjustments.

In 4Q24, attributable net profit fell 2.4% QoQ to Rmb4.71bn for A-shares (vs. Rmb2.85bn in 4Q23), and recurring net profit attributable to shareholders dropped 1.9% to Rmb4.68bn (vs. Rmb2.80bn in 4Q23). We believe the firm’s 4Q24 earnings remained resilient, as ASP of thermal coal stayed flat QoQ and per-tonne cost of coal optimized further.

Comments:

ASP of coal declined. In 2024, the ASP of self-produced coal fell 6.6% YoY to Rmb562/t, with that of thermal coal and coking coal falling 6.2% and 9.5% YoY. The ASP of self-produced coal fell 10.2% YoY and 1.5% QoQ to Rmb538/t in 4Q24.

Coal output increased YoY. As the production capacity of the Dahaize coal mine continues to increase, the firm's commercial coal output rose 2.5% YoY to 138mnt in 2024, with thermal coal and coking coal output rising 2.3% and 4.4% YoY to 126.17mnt and 11.40mnt. In 4Q24, thermal coal and coking coal output rose 5.6% YoY and 21.4% QoQ to 32.42mnt and 2.84mnt.

Cost per tonne of coal improved. In 2024, H-share sales cost per tonne of self-produced coal fell 2.5% YoY to Rmb344.8, and production cost per tonne excluding freight costs fell 1.6% YoY to Rmb287.4. Per-tonne coal depreciation and amortization fell 12.8% YoY to Rmb46.1, due to higher amortization base under the units-of- production method.

Output of major chemicals fell 5.7% YoY to 5.69mnt, with sales volume falling 4.6% YoY to 5.84mnt in 2024.

Investment income fell 14.7% YoY to Rmb2.56bn in 2024, with attributable net profit from its invested companies Huajin Coking Coal, Hecaogou Coal, and ZTHC Energy changing -52.3%, -19.1% and +8.1% YoY.

The firm proposed a final dividend of Rmb3.42bn and an interim dividend of Rmb2.94bn for 2024, implying a full-year dividend payout ratio of 35% for H-shares.

Trends to watch

2025 plan: The firm targets sales of over 133mnt of self-produced commercial coal, 1.34mnt of polyolefin, and 2.05mnt of urea. The firm expects its 2025 capex to reach Rmb21.68bn (+41.74% YoY), including Rmb8.30bn, Rmb8.65bn, Rmb1.39bn, and Rmb2.69bn for coal, coal chemicals, power, and new energy.

Financials and valuation

Given falling coal prices, we cut our 2025 A- and H-share earnings forecasts 15% and 22% to Rmb15.5bn and Rmb14.7bn. We introduce our 2026 A- and H-share earnings forecasts of Rmb15.7bn and Rmb14.9bn. A-shares are trading at 8.8x 2025e and 8.6x 2026e P/E, and H-shares at 6.9x 2025e and 6.7x 2026e P/E. We maintain OUTPERFORM ratings for A- and H-shares. We cut our target prices 13% and 18% to Rmb13.00 (11.1x 2025e and 11.0x 2026e P/E with 27% upside) for A-shares and HK$9.00 (7.6x 2025e and 7.4x 2026e P/E with 10.8% upside) for H- shares.

Risks

Demand recovery disappoints; supply growth beats expectations.