Shanxi: Focus on the profit recovery of the coal sector, buy on the dip.

Shanxi releases research report: Pay attention to coal profit recovery. In November, coal prices turned from rising to falling. From the perspective of price seasonality, the seasonal trend of coal prices in 2025, 2024, and 2023 is consistent, showing "off-season not light" and "peak season not strong". After the previous price surge exceeded expectations, there is a certain pressure for mean value recovery. The cold wave is coming, and the demand in the peak season is somewhat supported. The performance in the fourth quarter is still expected to improve. If the price continues to operate at a high level for a long period, there is still a large space for performance recovery in 2026. The stock price decline strengthens the dividend value, and it is recommended to buy on dips. Main points from Shanxi: Supply: Coal supply decreased marginally from January to November. From January to November 2025, the cumulative coal production reached 4.402 billion tons, a year-on-year increase of 1.4%, with a marginal decrease in the growth rate compared to the previous year. In November, 427 million tons were produced, a decrease of 0.5% year-on-year and an increase of 4.93% month-on-month. Demand: End-user demand has been declining, with downstream demand awaiting improvement. From January to November 2025, fixed asset investment decreased by 2.6% year-on-year, with manufacturing investment increasing by 1.9%, infrastructure investment decreasing by 1.1%, and real estate investment decreasing by 15.9%. The cumulative growth rate for coal-fired power generation in 2025 was -0.7%; coke production was 3.2%; pig iron production was -2.3%; cement production was -6.9%; in November, coal-fired power generation increased by 4.2%; coke production increased by 2.3%; pig iron production decreased by 8.7%; cement production decreased by 8.2%. Imports: Coal imports decreased in November, and the trend of contraction in imports continued from January to November. From January to November 2025, the cumulative coal imports reached 432 million tons, a decrease of 12.0% year-on-year. In November, 44.05 million tons were imported, a decrease of 19.88% year-on-year and an increase of 5.55% month-on-month. Prices: Coal prices rose more than expected in November. Although the average prices of Shanxi's blended 5500 power coal, Jingtang Port primary coking coal, and Tianjin Port secondary metallurgical coke have been adjusted since 2025, the average prices of the three varieties all increased to varying degrees in November. The month-on-month increase for each variety in November was power coal > coke > coking coal. Analysis: Coal prices turned from rising to falling in November. For most of November, coal prices continued the upward trend from October, driven by power plant restocking. After downstream power plants completed their restocking, coal prices fell slightly in the peak season. From the perspective of price seasonality, the seasonal trends of coal prices in 2025, 2024, and 2023 are consistent, showing "off-season not light" and "peak season not strong". After the previous price surge exceeded expectations, there is a certain pressure for mean value recovery. The original intention to combat "involution" has not changed. In terms of core macro goals, combating "involution" is mainly to reverse the deflation trend, with the transmission chain being "deflation anti-involution profit improvement inflation". Therefore, increasing the level of inflation requires maintaining reasonable profits in all sectors. Therefore, combating "involution" does not emphasize "overcapacity" but tends to express the idea of "current supply is temporarily excessive, waiting for demand release". On the other hand, achieving reasonable profits in all sectors is conducive to restoring confidence and breaking the deflationary trend. Therefore, a balanced consideration is needed for combating "involution" in the coal industry. In the short term, supply control is important, while in the medium to long term, demand recovery is crucial. The recent rapid decline in coal prices has raised concerns in the market, but considering that combating "involution" is still an important theme in economic work for the next year, the policy direction has not changed. If prices fall to a low level, policies to stabilize expectations are worth looking forward to. Risk warning: Supply reduction is not as expected, demand recovery is not as expected, a significant increase in coal imports, and the performance of related companies is lower than expected.