BofA Securities: China Shenhua Energy (01088) Q3 results below expectations, strong coal and weak power, maintain "Buy" rating with target price of HK$48

BofA Securities issued a research report maintaining its "Buy" rating and HK$48 target price on China Shenhua Energy (01088). The bank noted that the company's third-quarter results were below expectations, showing stronger coal operations and weaker power operations. Under GAAP, the company's net profit attributable to owners of the parent for the first nine months was RMB44.4 billion, up 4% year-on-year on a restated basis; third-quarter net profit was RMB15.7 billion, up 3% year-on-year, below expectations, mainly because the benefit from stronger coal prices was partly offset by rising costs and weaker margins in the power business. The bank noted that the company's third-quarter gross margin remained at 35%, broadly flat versus the first half; discretionary spending as a proportion of revenue and the effective tax rate were also broadly stable, with an effective tax rate of 22%. In the first nine months of the year, the company's operating cash flow remained strong at RMB93 billion, versus capital expenditure of RMB47 billion. Capital expenditure is already close to the full-year target of RMB56 billion, helping to support a solid free cash flow outlook and cash return potential. BofA Securities noted that China Shenhua Energy currently offers a 2026 expected dividend yield of 6.7%.