Yankuang Energy Group (01171): Black gold market boom on the rise, Red Falcon consolidation adds incremental growth

In the 2026 coal market, the third quarter experienced a round of remarkable value re-rating. Qinhuangdao 5,500 kcal thermal coal prices climbed modestly from the start of the year, with the third-quarter average reaching RMB882/tonne, a year-on-year increase of more than 30%, and in October briefly broke through the RMB1,000 mark. Against this industry backdrop, Yankuang Energy Group (01171) released its third-quarter report. It was noted that in the first three quarters the company achieved operating revenue of RMB117.504 billion (same currency hereinafter), up 11.33% year on year; net profit attributable to shareholders of the listed company of RMB11.117 billion, up 55.95% year on year; net profit after deducting non-recurring gains and losses of RMB8.544 billion, up 31.07% year on year, with basic earnings per share of RMB1.11. Of this, third-quarter net profit attributable to parent was RMB3.968 billion, a sharp year-on-year increase of 73.28%. Profit growth significantly outpacing revenue growth shows this is not simple scale expansion but high-quality growth driven by restored profitability, with the coal segment the core DRIVE of this round of results. Prices up, costs down, coal segment gross profit markedly higher From an industry perspective, the root of this round of price increases lies in the superposition of multiple supply-side constraints. Domestically, the impact of safety regulation on major producing areas continued from the start of the year to year-end, coal mine production became more cautious, and annual approved capacity constraints together with limited railway capacity for Xinjiang coal outbound transport jointly restricted supply increments. On imports, low river water levels in Indonesia restricted barge transport, the landed cost of some imported coal was inverted versus selling prices, and importers' supplementary role was greatly diminished. The direct consequence of supply contraction was a systemic uplift in the price center, but price increases were not evenly distributed: coking coal is more market-oriented and more sensitive to supply changes. In the third quarter, Jingtang Port main coking coal prices once held in the high range of RMB2,430/tonne, with the average price up about 58% year on year over the same period, significantly stronger than thermal coal's roughly 30% gain. This structural feature of "strong coking coal, weak thermal coal" precisely constitutes the value of coal-type structure optimization after the Red Falcon delivery for Yankuang Energy Group, whose assets are mainly thermal coal. In our view, the quality of Yankuang Energy Group's report card is first reflected in the volume-price game of its core coal business. On the production side, the company continued its capacity layout of "stabilizing within the province, expanding outside the province, and optimizing overseas." In the first three quarters, commercial coal output was 131.791 million tonnes, down 3.02% year on year, a decline but still at a high level for the same period in history. More noteworthy is the sales side: commercial coal sales in the same period were 126.030 million tonnes, down only 0.32% year on year, a much smaller decline than output. Output contracted while sales were basically stable, indicating that through inventory adjustment and traded coal supplementation the company kept the impact of stricter safety regulation on revenue relatively low, and also provided a solid sales base for profit realization. Price-side elasticity came from dual support of structure and operations. The company's combined long-term contract coal share is relatively low and spot sales proportion relatively high, allowing it to more fully realize price gains during the domestic and international coal price upcycle; at the same time, through refined marketing methods such as leading price increases while slowing declines, auction sales, and clean coal value creation, it captured the market window. Reflected in results, the comprehensive average price of self-produced coal rose 16.8% year on year to RMB587.8/tonne, and coal and supporting industries achieved net profit attributable to parent of RMB9.96 billion, becoming the core support for results. Cost-side improvement also deserves a closer look. Facing rigid increases in diesel, labor and other factor prices in Australia, the company offset higher spending through centralized procurement, headcount control and efficiency improvement, and assessment constraints. Third-quarter per-tonne coal selling cost fell to RMB332.7/tonne, down 5.7% quarter on quarter, while self-produced coal cost fell 2.6% year on year and 9.0% quarter on quarter. Rising selling prices and falling costs formed a "scissors gap," directly enlarging per-tonne coal gross profit space, which is also the direct reason for the coal segment's gross profit improvement and profit growth far exceeding revenue growth. This simultaneous occurrence of "price increases" and "cost declines" means the coal segment's earnings quality does not rely solely on one-way rises in market coal prices but is with genuine improvements in internal operating efficiency. The financial structure is also being optimized in tandem: by the end of the third quarter, the debt-to-asset ratio had fallen to 60.8%, down 1.5 percentage points from the start of the year; net cash flow from operating activities was RMB25.486 billion, up 29.76% year on year, with cash flow growth basically matching profit growth, indicating solid cash content in earnings. From a business structure perspective, the chemicals and power segments showed divergence. In the first three quarters, the comprehensive price of chemical products was RMB3,180/tonne, up 10.5% year on year, with price-side improvement continuing. The power segment's average electricity selling price was RMB0.36/kWh, down 6% year on year; against the backdrop of rising coal prices pushing up fuel costs, the power business's profit space was somewhat squeezed. This divergence does not change the overall pattern of the coal main business providing support, but it also suggests that the hedging effect of coal-power integration during a coal price upcycle still needs time to be verified. Red Falcon coal mine completes delivery, dual upgrade in coal types and output If the third-quarter results are the present already in hand, then the delivery of the Red Falcon coal mine is a clearly visible future. On October 1, 2026, Yancoal Australia completed delivery of 100% equity interests in Red Falcon Group, indirectly acquiring an 80% interest in the Red Falcon coal mine. The upfront cash consideration of US$1.85 billion has been paid to the account designated by the counterparty, and Yancoal Australia will recognize its attributable output and economic benefits from the Red Falcon coal mine from the delivery date. This timing falls exactly after the end of the third-quarter reporting period, meaning Red Falcon's contribution has not yet entered any page of the first three quarters' statements, but will be fully presented in fourth-quarter and 2027 results. The significance of the Red Falcon coal mine is not simple output addition. This mine, located in the Bowen Basin of Queensland, is one of Australia's largest underground metallurgical coal mines, mainly producing high-quality hard coking coal. The company's announcement explicitly stated that the Red Falcon coal mine will contribute high-quality metallurgical coal, helping Yancoal Australia achieve scale expansion and strengthen diversified layout. Yankuang's previous coal assets were dominated by thermal coal, with relatively single exposure to the price cycle; after the injection of Red Falcon's hard coking coal assets, the weight of metallurgical coal in the overall product mix rises. Connecting this with the earlier price structurecoking coal's elasticity during the year was stronger than thermal coal'sRed Falcon brings not only volume increments but also a structural upgrade in price elasticity. At the same time, the company's reserve projects do not stop at Red Falcon; new mines such as Wucaiwan No. 4 and Youfanghao continue to be built, which will hedge the impact of safety regulation and support medium- to long-term capacity release. Summary Viewed together, the third-quarter report and the Red Falcon delivery make Yankuang Energy Group's current picture clear: profit growth in the first three quarters verified the company's ability as a thermal coal leader to realize earnings during a coal price upcycle, while Red Falcon's consolidation has injected a quantifiable and trackable inorganic increment into the fourth quarter and the further future. The sustainability of high coal prices certainly remains variable. By late October, thermal coal prices had already seen a modest pullback, and the coking coal market had also entered weak oscillation, with the short-term supply-demand game still continuing. But even if the price center modestly retreats from current levels, the output and coal-type structure improvement brought by Red Falcon will still constitute an independent source of growth, while the company's existing high-dividend tradition provides another layer of safety cushion for valuation. In this sense, Yankuang Energy Group's focus in the fourth quarter of 2026 is no longer merely "how much more coal prices can rise," but "whether the two lines of coal prices and M&A can resonate." Judging from the earnings realization in the third-quarter report and the on-schedule landing of the Red Falcon delivery, the answer is leaning toward the affirmative side.