Industry insiders pointed out that the performance of the coal sector in the first half of the year was better than expected, and the boom will remain high in the second half of the year. Taking into account the protection of supply and discharge and the strong coal price, coal companies are expected to be supported at both ends of the volume and price, and their performance is expected to further improve in the second half of the year.

Segment profitability hit a record high

Data show that the average market price of Q5500 in Qinhuangdao in the first half of the year increased by 49.5% year-on-year, of which the second quarter rose by 68.3% year-on-year.

Benefiting from the sharp rise in coal prices, the coal industry's profitability in the first half of the year hit a record high. Wind statistics show that the 37 listed companies covered by Shenwan Mining's secondary coal mining sector achieved a total net profit of 75.577 billion yuan in the first half of the year, a year-on-year increase of over 60%.

It is worth mentioning that the coal sector’s performance in the second quarter grew strongly. Wind data shows that in the second quarter, the net profit of the coal sector attributable to the parent increased by 69.31% year-on-year and 26.05% month-on-month. Among them, the net profit attributable to the thermal coal sector increased by 53.94% year-on-year and 28.8% month-on-month; the anthracite coal sector increased by 220.19% year-on-year and 87.9% month-on-month; the coking coal sector increased by 91.93% year-on-year and 13.05% month-on-month.

According to the National Bureau of Statistics, the total profit of coal enterprises above designated size in the first half of 2021 was 206.88 billion yuan, a year-on-year increase of 113.8%.

The semi-annual report of Shaanxi Coal Industry shows that in the first half of the year, the company achieved operating income of 72.669 billion yuan, an increase of 87.24% year-on-year; net profit attributable to shareholders of listed companies was 8.286 billion yuan, an increase of 66.09% year-on-year.

According to data, in the third quarter, the Shaanxi thermal coal price index rose by 22.09% from the previous quarter, and the average price of thermal coal in the Bohai Rim rose by 9.4% from the previous month. Rising coal prices will boost the performance of related listed companies.

Coal prices are expected to remain high in the second half of the year

Since the third quarter, coal prices have performed strongly. Data show that as of the end of August, the average market price of Q5500 in Qinhuangdao was 1,046 yuan/ton, a year-on-year increase of 81.85% and a month-on-month increase of 19.65%. With the arrival of the peak coal consumption season, the inventory levels of ports and downstream power plants are at historically low levels. The industry expects that coal prices will remain strong.

The latest research report of Zhongtai Securities pointed out that the performance of the semi-annual report of the coal sector was better than expected, and the performance of the third quarter report is expected to be better. In the medium and long term, industry insiders believe that in the context of “carbon neutrality”, coal companies will reduce their willingness to spend on capital, and the reduction in supply is expected to drive coal prices to remain high.

The "Circular on the Operation of Coal Economy in the First Half of 2021" recently issued by the China Coal Industry Association shows that coal prices have been operating at a high level in the first half of the year. From January to July, the average long-term contract price was 601 yuan/ton, a year-on-year increase of 62 yuan/ton. At the end of June, the comprehensive transaction price of 5500 kcal thermal coal at Qinhuangdao Port was 819 yuan/ton, an increase of 274 yuan/ton year-on-year; the CCTD Shanxi coking fertilizer clean coal comprehensive price was 2,125 yuan/ton, an increase of 890 yuan/ton year-on-year.

The National Development and Reform Commission issued a document on August 30, requesting the inspection and remediation of price increases in mines that have implemented capacity replacement commitments and guaranteed supply coal mines in Inner Mongolia. Looking ahead, Essence Securities believes that a number of coal production increases and guarantees have been released recently, and coal prices are expected to remain stable in the second half of the year, which is beneficial to thermal power companies.

West China Securities pointed out that in the case of strong demand and low inventory throughout the industry chain, short-term thermal coal prices will remain high. With the expected increase in coal production in the future, power plants are expected to slow down the procurement rhythm during peak seasons and shift to the subsequent off-season replenishment. Kaiyuan Securities pointed out that the overall boom in the coal industry will not change in the second half of the year. Taking into account the strong supply and decentralization and the strong coal price, coal companies are expected to be supported at both ends of the volume and price. They are optimistic about the further improvement in performance in the second half of the year and the increase in the valuation of coal stocks.

According to industry insiders, the leading companies in the coal industry and companies that maintain high growth in net profit are worthy of attention. In addition, pay attention to the second growth pole of coal companies. For example, transforming coal chemical industry, producing methanol LNG, deploying photovoltaic and hydrogen energy and other traditional coal enterprises to diversify their operations.