Hong Kong stock concept tracking | Coal stocks continue to be strong! Coal daily consumption has reached the highest level in the past 5 years. Institutions are optimistic about the sector rebounding in the fourth quarter (including concept stocks)

On October 20, coal stocks in the Hong Kong stock market continued their strong performance from the previous week. At the close, JINMA ENERGY (06885) surged by over 15%, Yankuang Energy Group (01171) rose nearly 4%, and China Shenhua Energy (01088) and others rose by over 2%. On the news front, due to abnormal weather before and after the National Day, rare high temperatures appeared in the southeast coast, coupled with the expectation of a cold winter driving winter storage demand, domestic coal consumption has reached the highest level in the past 5 years. In addition, since the energy bureau's verification of overproduction policies in July, domestic coal production has been continuously suppressed by various factors. In July and August, coal production has decreased for two consecutive months compared to the same period last year, and overall inventory is lower than the same period last year. Guosen pointed out that with the double positive turn in the industry's fundamentals from the supply and demand sides, the rise in coal prices has exceeded expectations. Specifically, thermal coal prices rebounded in the off-season. As of October 17, 2025, the closing price of Q5500 at the northern Huanghua Port was 750 yuan/ton, up 34 yuan/ton (4.7%) from the previous week. In terms of supply, domestic supply is stable, while imports continue to decrease: it is expected that the total supply of domestic and imported coal will remain basically stable and decline slightly throughout the year. On the demand side, the off-season demand has significantly improved, and Q3 profits are expected to rebound. Coke price futures rebounded jointly, and molten iron is expected to remain strong in the off-season. As of October 17, 2025, the main coke price at Jingtang Port (Shanxi origin) was 1690 yuan/ton, up 30 yuan/ton (1.8%) from the previous week. Average daily molten iron production in the previous week fell slightly compared to the previous week, and demand is expected to remain strong in the off-season. In terms of inventory, pressure on inventory at all levels has significantly eased compared to the first half of the year, supporting the rebound in coal prices. The mainstream port inventory in China is 60.43 million tons, down more than 18 million tons from the mid-May peak, lower than the same period last year by 5.8%; coal company sales have improved, with inventory declining. In August, the inventory of key state-owned coal mines in six regions in China was 24.23 million tons, a month-on-month decline of -8.25% and a year-on-year increase of +0.48%, lower than the same period last year. Power plant inventory is slightly higher compared to the same period last year. Molten iron production remains high, downstream demand is good, and coke inventory is higher than the same period last year; with the improvement in supply and demand patterns, port inventories are significantly lower than the same period last year. From the demand side, the total electricity consumption nationwide in August increased to 4.6% year-to-date, compared to only 2.5% in Q1, showing a rapid increase. Normal demand season for September and October, demand has exceeded expectations, with the consumption in October after the long holiday in the Yangtze River Delta region still at a high level, causing daily consumption to be the highest in the past 5 years. From the supply side, the contraction in coal supply due to the influence of anti-"internal rotation" policies is leading the industry. Since the involvement of the National Energy Administration in July in anti-"internal rotation" in coal, coal production in July and August in the country was 380 million tons and 390 million tons, significantly lower than the average monthly production in the past 1 and a half years (about 400 million tons). In August, the coal production of industrial scale enterprises was 390 million tons, a year-on-year decrease of 3.2%, an increase of 10 million tons from July in production. Looking ahead to the annual production, it is expected that the national output in Q4 will decrease slightly month-on-month due to the impact of "checking for overproduction", and the production from September to December is expected to remain at 390-400 million tons per month, with an annual production of around 4.75 billion tons, a decrease of 300-500 million tons year-on-year. Furthermore, looking at the changes in the PE and PB of the coal industry over the past 20 years can help investors identify the bottom reversal timing. Looking at the changes in the PE and PB of the coal sector, it can be seen that after a period of rapid development in the early stage, the PE and PB of the coal industry have fluctuated downward. During this period, there were two significant differentiations. The first occurred from 2014 to 2017, mainly due to the bull market driving the index up in the early stage, and later, due to poor profitability of coal enterprises, leading to high PE ratios. The second occurred from the middle of 2024 to the present, where the downward trend in coal prices and poor profitability of coal enterprises led to low PE ratios. After the rebound in coal prices in the second half of 2025, coal enterprise profitability is expected to improve, and coal prices in the fourth quarter are expected to have upward elasticity, combined with the recent improvement in the market, the performance of the coal sector has been weaker than other sectors. The bottom is clear, and it is expected that the coal sector will rebound in the fourth quarter. Guosen believes that after the rebound in coal prices in the second half of 2025, coal enterprise profits are expected to improve, and coal prices in the fourth quarter have upward potential. Combined with the recent improvement in the market, the performance of the coal sector has been weaker than other sectors, and the bottom is clear, making the coal sector a good investment opportunity. After the holiday, coal prices quickly stopped falling and rebounded, reflecting the continuous strengthening of supply tightening expectations, raising the bottom of coal prices, and opening up space for coal price increases with the release of strong demand in the peak season. The second quarter also verifies the bottom of coal prices and performance. Currently, the sector has high PE ratios and low PB ratios, indicating a cyclical low, and the upward trend in coal prices or opening up space for rebound in the sector. Guosen also believes that as the industry's fundamentals have seen a double positive turn from the supply and demand sides, the rise in coal prices has exceeded expectations. Under the influence of the anti-"internal rotation" policy on the supply side of coal, the supervision of coal mine safety has been strengthened, and overproduction situations are expected to further decrease, reinforcing expectations of coal supply contraction. On the demand side, the La Nina phenomenon and expectations of a cold winter are driving winter storage demand, while abnormal weather around the National Day this year, with rare high temperatures in the southeast coast, have pushed coal consumption to historical highs. In terms of market trends, the revival of trade conflicts may lead to more intense style shifts between high and low-end, and whether it is defensive dividend properties or coal with obvious turning points in the low-end fundamentals may significantly increase attractiveness to the market. Related concept stocks: China Shenhua Energy(01088): CMSC pointed out that China Shenhua Energy's net profit attributable to shareholders in the first half of 2025 was 24.641 billion yuan, a year-on-year decrease of 12.0%; non-GAAP net profit attributable to shareholders was 24.312 billion yuan, a year-on-year decrease of 17.5%; operating cash flow was 45.794 billion yuan, a year-on-year decrease of 11.7%. The high proportion of long-term contracts supports coal prices, and cost control stabilizes gross profit. The company remains committed to investors, with a midterm dividend payout ratio of 79%. As a leading energy company, with a coal business as its foundation, actively developing in the fields of electricity, transportation, and other areas, forming an integrated layout of coal and electricity operations, which is conducive to enhancing performance stability. Continued optimism about the company's profitability, maintaining a "strongly recommended" investment rating. Yankuang Energy Group(01171): Founder pointed out that Yankuang Energy Group is a leading coal company in the northern region, with coal bases in Shandong, Shanxi, Inner Mongolia, and Australia. It is also the only coal enterprise in China with a large volume of overseas resources, having entered the overseas coal market through the acquisition of the Australian Austar coal mine in 2004 and the establishment of YANCOAL AUS. The company has always been a high-dividend enterprise, and from 2023 to 2025, the company has committed to a dividend payout ratio of not less than 60%. The current company still has cost-effectiveness, especially in the low valuation of Hong Kong stocks, with a relatively high dividend yield, making Yankuang Energy Group's Hong Kong stock dividend yield an attractive investment. China Coal Energy(01898): Sealand pointed out that in the first half of the year, China Coal Energy's net profit attributable to shareholders was 7.7 billion yuan, a year-on-year decrease of 21.3%; Q2 net profit attributable to shareholders was 3.727 billion yuan, a quarter-on-quarter decrease of 6.3% and a year-on-year decrease of 22.7%. Considering the high proportion of long-term contracts of the company, strong performance stability, and the upcoming commissioning of Must Coal Mine and Weizigou Coal Mine, the gradual release of coal chemical business capacity, there is still room for growth in performance. Additionally, the company has increased its dividend payout to shareholders, maintaining a "buy" rating.