Shanxi: Coal supply continued to recover in November, with continued high growth in manufacturing investment.

Shanxi released a research report stating that coal production safety supervision tends to be normalized, with supply recovering in November but the year-on-year growth rate slightly lower than the same period last year; with the expectation of a warm winter for coal-fired power plants, coal demand has not yet been released, and the domestic port power coal prices are relatively weak. In terms of coking coal and coke, demand is weak, non-electricity coal incremental demand is still limited, downstream steel mill operating rates are decreasing, putting pressure on coking coal prices. Overall, due to strict and normalized safety supervision, and with stable economic policies still available, there is marginal improvement expected in the later period for economic stabilization policies such as real estate and infrastructure, and with the winter approaching, there is hope for marginal improvement in coal demand for power generation. The rigidity of coal demand is relatively strong, and it is unlikely for the supply-demand relationship of coal to further relax in 2024, so there is little possibility of major fluctuations in coal prices in the fourth quarter. Supply: Coal supply from January to November increased slightly compared to the same period in 2023. From January to November 2024, the cumulative coal production reached 4.322 billion tons, a year-on-year increase of 1.20%, with a decrease in growth rate compared to the same period in 2023. In November, coal production reached 428 million tons, a year-on-year increase of 1.80%, with a decrease in growth rate compared to the same period last year. Demand: Manufacturing investment continued to grow in the first 11 months, with downstream demand overall under pressure. The overall growth rate of fixed asset investment remained stable, with high growth in manufacturing investment. From January to November 2024, fixed asset investment increased by 3.3% year-on-year (an increase of 0.4 percentage points compared to the same period in 2023). Manufacturing investment increased by 9.30% (an increase of 3.0 percentage points compared to the same period last year), infrastructure investment increased by 4.2% (a decrease of 1.6 percentage points compared to the same period last year), and real estate investment decreased by 10.4% (an increase of 1.0 percentage points compared to the same period last year). From January to November 2024, the cumulative growth rate of thermal power generation reached 1.90%, a decrease of 3.80 percentage points compared to the same period last year; the cumulative growth rate of coke reached -0.90%, a decrease of 4.20 percentage points compared to the same period last year; the cumulative growth rate of pig iron reached -3.50%, a decrease of 5.30 percentage points compared to the same period last year; and the cumulative growth rate of cement reached -10.10%, a decrease of 9.20 percentage points compared to the same period last year. Imports: Imports continued to grow from January to November. From January to November 2024, imports reached 490.34 million tons, an increase of 14.80% year-on-year, with imports in November reaching 549.80 million tons, an increase of 26.37% year-on-year, slightly lower growth compared to the same period last year. Prices and Profits: Power coal and coking coal prices are relatively weak overall. In November, the average price of 5500 grade power coal in Shanxi was 845 yuan per ton, a decrease of 10.64% year-on-year and 2.24% month-on-month. The average price of primary coking coal at Jing Tang Port in November was 1659 yuan per ton, a decrease of 33.71% year-on-year and 12.20% month-on-month. The average price of secondary metallurgical coke at Tianjin Port in November was 1688 yuan per ton, a decrease of 23.74% year-on-year and 4.40% month-on-month. Recommendations: Repurchase and SFISF cases in the monetary instrument market continue to land, arbitrage trading is expected to deepen the value of coal dividends, it is recommended to pay attention to high dividend yield and stable high dividend yield varieties. In terms of high dividend yield, the following companies are relatively preferred: Guanghui Energy (600256.SH), Pingdingshan Tianan Coal Mining (601666.SH), Yankuang Energy Group (600188.SH), Anhui Hengyuan Coal Industry and Electricity Power (600971.SH), Beijing Haohua Energy Resource (601101.SH), Huaibei Mining Holdings (600985.SH), Jinneng Holding Shanxi Coal Industry (601001.SH). In terms of stable high dividend yield, the following companies are relatively preferred: China Shenhua Energy (601088.SH), Shaanxi Coal Industry (601225.SH), China Coal Energy (601898.SH). Shanxi coal enterprises are frequently expanding reserves, and based on the calculated resource prices per ton sold, the market value level is much higher than the current market value. As the negative factors of previous production cuts diminish, related company valuations have significant room for recovery, and it is recommended to pay attention to Shan Xi Hua Yang Group New Energy (600348.SH), Shanxi Luan Environmental Energy Dev.Co.,Ltd (601699.SH), Shanxi Coking Coal Energy Group (000983.SZ). Risk warning: Excessive release of supply; inadequate improvement in demand; EU coal shortage falling short of expectations, leading to a large influx of imported coal into the domestic market; strong price controls; failure of coal enterprise transformation, etc.