Morgan Stanley: China Shenhua Energy's preliminary second quarter results exceed expectations, reiterates "overweight" rating.

Morgan Stanley released a research report stating that China Shenhua Energy (01088) is expected to see a 7% to 21% year-on-year increase in net profit in the first half of 2026, reaching 26.3 billion to 29.8 billion RMB, outperforming the bank's expectations of 26 billion RMB. This means that its net profit for the second quarter will range from 15.6 billion to 19.1 billion RMB, a year-on-year increase of 23% to 51%, exceeding expectations. After the injection of 11 assets into the consolidated group, the net profit for the first half of the year is expected to range from a decrease of 4.7% to an increase of 8% according to restated figures. Morgan Stanley reaffirmed its "overweight" rating for China Shenhua Energy, with an H share target price of 48.3 Hong Kong dollars unchanged. The bank pointed out that the company's preliminary performance was strong, mainly reflecting the higher coal prices year-on-year (especially in the second quarter), as well as increased profit contributions from coal chemical, railway, and port businesses. Despite recent declines in coal prices due to reduced daily consumption at power plants and high port inventories caused by heavy rainfall in many areas, with the end of the rainy season, the peak in daily consumption and the release of demand for power plant replenishment, coupled with continued supply constraints in major coal-producing provinces, will continue to support thermal coal prices, and it is expected that Shenhua's profit in the third quarter will remain robust.