CITIC SEC Coal Q3 Earnings Preview: Fundamentals Improving Quarter by Quarter, Maintaining Rapid Growth

CITIC SEC released a research report stating that although supply-guarantee policies are gradually being advanced in the short term, which may suppress sector performance from a sentiment perspective, it will take time to reverse the tight supply situation in the industry. If winter restocking demand is effectively released, coal prices are still expected to exceed expectations; at the same time, coal prices rose sharply quarter-on-quarter in Q3, and sector earnings are expected to improve significantly, providing support for valuations. Under this judgment, we remain bullish on the sector rally under supply contraction and optimistic about the performance of companies with low valuations and improving earnings. CITIC SEC's main views are as follows: 2026Q3 coal prices rose significantly both year-on-year and quarter-on-quarter. Due to strengthened safety supervision after the mine accident, domestic coal output fell sharply year-on-year in Q3, with supply contraction evident. Average prices of all coal types generally rose in 2026Q3. Among them, the average quarter-on-quarter increase in market prices for thermal coal was about 14%, with a year-on-year increase of about 34%; the average quarter-on-quarter increase in pithead thermal coal prices was higher than at ports, at 21%/8% respectively; while port annual long-term contract coal prices rose only 1.8% quarter-on-quarter; average anthracite prices rose about 36% quarter-on-quarter and about 59% year-on-year; metallurgical coal prices rose about 23% quarter-on-quarter and nearly 46% year-on-year. Net profit of sample listed companies rose 27% quarter-on-quarter in 2026Q3, and rose 42% year-on-year in the first three quarters of 2026. Data from the National Bureau of Statistics show that in the first eight months of 2026, coal mining and washing enterprises above designated size nationwide achieved cumulative total profits of 294.4 billion yuan, up 51.6% year-on-year. It is estimated that the main tracked sample listed coal companies will see net profit grow 42% year-on-year in the first three quarters of 2026, and single-quarter net profit in 2026Q3 is expected to rise about 27% quarter-on-quarter. By sub-sector, it is estimated that the aggregate net profit of the thermal coal/metallurgical coal/anthracite sub-sectors in 2026Q3 will rise about 21%/54%/40% quarter-on-quarter, respectively. 2026Q4 fundamentals outlook: Although supply-guarantee policies are being, it will take time to reverse the tight supply pattern. After the Shanxi mine accident in late May this year, safety supervision became stricter, and coal output fell significantly. In September, raw coal output continued to decline by nearly 7% year-on-year; although supply-guarantee policies are currently being, nationwide raw coal output in Q4 is still expected to decline by about 3% year-on-year. On the demand side, demand from major downstream industries also weakened year-on-year in Q3, but is expected to gradually stabilize year-on-year in Q4; on a quarter-on-quarter basis, thermal coal demand also increased significantly due to the peak season. It will take time to ease the tight supply situation in the industry, and the average coal price in Q4 is expected to continue rising quarter-on-quarter. Risk factors: Easing geopolitical conflicts and overseas coal production cuts falling short of expectations, leading to a systemic decline in international coal prices; macroeconomic fluctuations affecting coal demand and coal prices; supply-guarantee policies being and safety supervision being relaxed somewhat, leading to increased supply; accelerated adjustment of the energy structure and intensified energy-saving and carbon-reduction efforts, increasing pressure on coal consumption; weather-related disruptions or effects on coal price expectations, etc.