Open Source Securities: Coal at a low level, multiple positive margin catalysts, cyclical dividends and double logic resonance pushing upwards.

Open source Securities released a research report stating that coal was once undoubtedly a traditional cyclical stock, but with the impact of geopolitical factors, dual carbon policies, and the balance between coal and electricity profits, the weakening of coal's cyclical nature is a fact, and coal has already shown a dual attribute of dividends and cycles. Against the background of weak economy and overall market yield decline, coal, as a representative of high dividend dividends, remains the most recognized value asset in the market; if policy assistance and market regulation cause short-term supply and demand mismatch, coal stocks are still expected to highlight cyclic properties with the changes in coal prices. The agency's judgment is that the dual attributes of dividends and cycles are expected to make coal the market's top priority asset for allocation. The main points of Open Source Securities are as follows: Industry innovation: Multiple marginal catalysis tend to make coal prices reasonable, and anti-internal circulation logic remains. Since 2016, the benchmark and model for the successful supply-side reforms, with the transformation of domestic energy structure and the deepening of dual carbon policies, the industry is expected to once again experience supply-side reforms (i.e. anti-internal circulation). The standard definition of supply-side reform or anti-internal circulation is divided into two stages: one is to reduce production and raise coal prices, and the other is to eliminate overcapacity and adjust the structure, both of which are indispensable, with the latter being the basis of the former. After reaching the peak carbon emissions, the industry will face another overcapacity situation, but with early optimization of supply-side capacity, as well as disruptions from Indonesian coal imports, coal prices are expected to trend towards a reasonable range, and the domestic coal supply and demand will tend to balance. The analysis indicates that the anticipated anti-internal circulation, although similar to 2016, will have its uniqueness and will safeguard the stable and orderly development of coal and the smooth operation of prices. After the rebound in thermal coal prices, the prices will fluctuate within a range, while the rebound in coking coal prices is completely elastic. Thermal coal is a policy-related coal variety, and the agency believes that the price increase will go through four processes: "repair of central enterprises' long-term contracts, repair of local long-term contracts, reaching the break-even point for coal and electricity profits, surpassing and approaching the balanced line of profit and loss for power plants". The repair of spot prices to the first and second targets above long-term contracts (central enterprise long-term contracts at 670 yuan and local long-term contracts at 700 yuan) is a necessary result under the operation of the dual-track system of bulk commodities, whereby long-term contracts, as preferential varieties, will invert against spot prices, causing downstream users to prioritize the purchase of spot commodities and temporarily defer the purchase of long-term contracts, thereby driving up spot prices. Achieving the third goal of reaching the break-even point for "coal and thermal power companies" (estimated to be around 750 yuan by 2025) will be the ideal outcome of the policy's goal of restoring coal prices. The process of surpassing the ideal price after the third goal is achieved is an inertia result, because the policy shift is not as precise as a scalpel, there will inevitably be this process. For the question of whether there is a top extreme value in the price increase, it is predicted to be around 860 yuan, with a range of 800-860 yuan being the balanced line of profit and loss for power plants. Coking coal, a market-oriented coal variety, the agency believes that prices are more determined by supply and demand fundamentals, and its target price can be derived from the ratio of coking coal prices to thermal coal prices. The spot price ratio of coking coal at Jing Tang Port to spot thermal coal at Qin Port is 2.4 times, which corresponds to coking coal target prices for the first, second, third, and fourth goals of thermal coal at 1608 yuan, 1680 yuan, 1800 yuan, and 1920-2064 yuan respectively. Coking coal futures will converge with the spot price of coking coal at Jing Tang Port. Investment recommendation: Anti-internal circulation reshapes core values, with both cyclical and dividend offense and defense. Selected coal stocks in four main themes will benefit: Theme one, cyclical logic: Thermal coal [Jinneng Holding Shanxi Coal Industry, Yankuang Energy Group], metallurgical coal [Pingdingshan Tianan Coal. Mining Co., Ltd., Huaibei Mining Holdings, Shanxi Lu'an Environmental Energy Dev. Co., Ltd.]; Theme two, dividend logic: [China Shenhua Energy, China Coal Energy (dividend potential), Shaanxi Coal Industry]; Theme three, diversified aluminum flexibility: [Henan Shenhuo Coal & Power, Inner Mongolia Dian Tou Energy Corporation]; Theme four, growth logic: [China Coal Xinji Energy, Guanghui Energy]. Risk Warning: Risks of economic slowdown; risks caused by supply-demand mismatches; risks of accelerated substitution by renewable energy.