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CHINA SHENHUA(1088)
Analysis¡G
China Shenhua recently announced its estimated results, expecting attributable profit to shareholders for the 2025 fiscal year to range from RMB 50.8 billion to RMB 55.8 billion. This represents a year-on-year decline of 18.6% to 10.6% compared to 2024, which is basically in line with market expectations. The group¡¦s production and operations have remained stable, with its core advantages in integrated operations continuing to strengthen and secure, stable energy supply effectively guaranteed. However, due to changes in the industry supply-demand dynamics, coal sales volume and average selling prices have declined, leading to a year-on-year drop in operating performance. Looking ahead to 2026, with the expansion of data centers, increased AI computing loads, and the widespread adoption of electric vehicles, China¡¦s electricity demand growth is expected to accelerate again, supporting a rebound in coal demand. Meanwhile, with slower supply growth, coal prices in 2026 are anticipated to rise compared to 2025. Additionally, policy changes in Indonesia regarding coal exports and production are providing significant support to global coal prices. Indonesia accounts for nearly half of the world¡¦s seaborne coal supply, and its export restrictions are expected to substantially narrow the global supply surplus of approximately 320 million tons. The Indonesian government plans to reduce coal production in 2026 to 600 million tons, a 24% decrease from 790 million tons in 2025. Estimates suggest that if production is ultimately cut by 20%, low-calorific-value coal prices could surge by 40% to 70%, while high-calorific-value coal prices may rise by 10% to 20%. Due to the production quota reductions, Indonesian miners halted spot coal exports in early February this year and are currently only fulfilling long-term contracts. At the same time, Indonesia has confirmed that starting in 2026, it will impose an export tax on coal ranging from 5% to 11%, which will directly increase export costs and be passed on to international buyers.
At the end of 2025, China Shenhua launched an asset acquisition from its parent company, China Energy Group, including 100% of Guoyuan Power, 100% of Xinjiang Energy, 100% of the Chemical Company, 100% of Wuhai Energy, 100% of Pingzhuang Coal, 41% of Shenyang Coal, 49% of Jinshen Energy, 100% of Baotou Mining, 100% of the Shipping Company, 100% of the Coal Trading Company, and 100% of the Port Company. The total acquisition price is RMB 133.6 billion, with approximately 70% paid in cash and the remaining 30% through the issuance of new A-shares. This transaction is regarded as the largest-scale asset restructuring in China¡¦s energy history. Through this deal, the group will acquire high-quality coal, pithead coal power, and coal chemical assets from China Energy Investment Group, optimizing the integration of the industrial chain resources, enhancing asset quality, scale efficiency, and risk resilience, while reducing costs and boosting profitability.
Upon completion of the acquisition, China Shenhua¡¦s resource reserves and production scale will see explosive growth. Specifically:
• Coal reserves will increase by approximately 65%, reaching a total of 68.5 billion tons.
• Recoverable coal reserves will rise by 97.7% to 34.5 billion tons.• Annual coal production capacity will increase from 327 million tons to 512 million tons, a growth of about 57%.
• Thermal power installed capacity will rise from 47.6 GW to approximately 60.9 GW.• In the coal chemical sector, polyolefin production capacity will surge 213% from 600,000 tons to 1.88 million tons.
At the same time, the acquisition will significantly improve operational performance, with the acquired assets expected to contribute more than RMB 9.4 billion in annual profit. Although the cash payment is substantial, China Shenhua holds cash reserves exceeding RMB 80 billion. Management has committed to maintaining a high dividend payout ratio (increasing the minimum payout ratio from 60% to 65% for 2025¡V2027), and the cash flow generated from the asset injection will support future dividends.
Strategy¡G
Buy-in Price: $41.50, Target Price: $46.00, Cut Loss Price: $39.50
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YANKUANG ENERGY(1171)
Analysis¡G
Yankuang Energy is the largest coal producer in East China, with its resource footprint spanning core production regions both domestically and internationally. Domestically, its operations are concentrated in Shandong, Shaanxi, Inner Mongolia, while internationally, Australia serves as its main overseas base. As of the end of 2024, the company¡¦s total coal resources amounted to 46.43 billion tonnes, with recoverable reserves reaching 6.005 billion tonnes, reflecting industry-leading resource endowment. In 2025, its commercial coal output reached 182 million tonnes (up 6.28% year-on-year), with sales of 171 million tonnes (up 3.39% year-on-year), placing its production scale among the top tier in the industry. Through the acquisition of Northwest Mining and the development of new mines in Shaanxi¡VInner Mongolia and Xinjiang (such as the Youfanghao Mine and Galutu Mine), the company aims to achieve a raw coal production capacity of 300 million tonnes by 2030, demonstrating clear growth potential. The coal industry continues to see tightening supply-side policies, with expectations of stricter restrictions on imported coal in 2026. Combined with seasonal stockpiling demand in winter, coal price trends are expected to shift upward. As a leading enterprise in China¡¦s coal sector, Yankuang Energy benefits from abundant resource reserves, ongoing capacity expansion, and strong cost control capabilities, ensuring robust long-term growth prospects.
Strategy¡G
Buy-in Price: $12.00, Target Price: $13.50, Cut Loss Price: $11.39
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Report Review of January. 2026
Sectors: Automobile & Air (Zhang Jing) Utilities, Commodity, Consumer Discretionary (Margaret Li) Automobile & Air (Zhang Jing)This month I released 3 initiation reports of Desay SV (002920.CH), Yinlun (002126.CH), and JNMPT (000700.CH), which got success by their unique Competitive edge. Among them, we recommend FLAT Desay SV and JNMPT first. Looking back at the Chinese automotive market in 2025, the industry maintained high momentum, with both domestic and export sales reaching record highs. Annual auto sales reached 34.4 million units, marking a 9.4% yoy increase. Domestic sales grew by 6.7% yoy to 27.302 million units. Among these, new energy vehicles performed exceptionally well, with sales rising 28.2% to 16.49 million units, and their penetration rate increasing by 7.0 percentage points to 47.9%. The penetration rate of new energy passenger vehicles domestically reached 54.0% (up 8.7 percentage points yoy), while that of commercial vehicles stood at 38.3% (up 10.4 percentage points yoy). On the export front, auto exports totaled 7.098 million units (up 12.1% yoy), surpassing 7 million units for the first time. New energy vehicles accounted for 36.8% of exports (up 14.9 percentage points yoy), becoming the core driver of export growth. On the policy front, the extension of the trade-in policy and the optimization of the tax exemption for new energy vehicles (extended until the end of 2027 with increased caps) effectively stimulated domestic demand. The competitive landscape of the industry accelerated consolidation, with the market share of domestic passenger vehicle brands rising to 69.5%. Leading automakers such as BYD, Geely, and Chery leveraged their technological advantages and global expansion to dominate the market. Looking ahead to 2026, we anticipate the automotive industry will enter a new phase of "stable volume and quality improvement," with annual sales increasing slightly by 1% to 34.75 million units. New energy vehicle sales are expected to reach 19 million units (up 15.2% yoy), further raising the penetration rate to 54.4%. For the automotive parts industry, 2026 is expected to usher in a new phase of "technological deepening + accelerated global expansion." Intelligentization will drive demand for core sectors such as computing power chips, smart chassis, and integrated cockpit/driving systems, while the commercialization of Level 3 autonomous driving will spur a surge in demand for high-computing-domain controllers, LiDAR, and electronic brake systems. Meanwhile, parts manufacturers are accelerating overseas production, forming a coordinated pattern of "vehicle exports + parts first" through CKD/SKD models. Leading domestic automotive electronics company Desay SV (002920.CH) is worth attention. Additionally, the spillover of automotive industry technologies into robotics will also create cross-border investment opportunities, with JNMPT (000700.CH) poised to benefit. Utilities, Commodity, Consumer Discretionary (Margaret Li)This month I released 2 reports of GOLDWIND (2208.HK) & CMOC (3993.HK). As a global leader in wind power, we believe that with the support of relevant policies, wind power demand will grow steadily, overseas orders are expected to increase gradually, and the company's future growth exhibits strong certainty, with robust development prospects.We forecast the company's revenue for 2025-2027 to be RMB 76.34 billion, RMB 92.537 billion, and RMB 106.622 billion, respectively, with EPS of RMB 0.81, RMB 1.09, and RMB 1.32. We employ the Discounted Cash Flow (DCF) method for absolute valuation.Key assumptions in the DCF analysis:WACC: Calculated using the formula WACC = Kd * Wd (1-T) + Ke * (1-Wd), resulting in 10.23%.Discounting Period: From 2025 to 2031.Perpetual Growth Rate: 2%.With a WACC of 10.23% and a perpetual growth rate of 2%, the company's fair value per share is estimated at HKD 19.21. We initiate coverage with a "Buy" rating.Under the scenario where WACC ranges from 9.21% to 11.25% and the perpetual growth rate ranges from 1.8% to 2.2%, the fair value per share falls within the range of HKD 14.72 to HKD 25.28. The company provided production guidance for its major products in 2026, which is as follows: copper metal is projected to be 760,000-820,000 tonnes; cobalt metal 100,000-120,000 tonnes; molybdenum metal 11,500-14,500 tonnes; tungsten metal 6,500-7,500 tonnes; niobium metal 10,000-11,000 tonnes; phosphate fertilizer 1.05-1.25 million tonnes; gold 6-8 tonnes; and physical trading volume 4.0-4.5 million tonnes. We believe the global copper market may remain in a tight supply-demand balance going forward. Supply is prone to disruptions, while demand benefits from increased investments in power grids and AI data centers. In October 2025, the government of the Democratic Republic of Congo (DRC) announced details of cobalt export quotas, ending an export ban that had been in place for eight months since the beginning of the year. The new regulations implement an annual quota management system, with quotas set at 96,600 tonnes per year for both 2026 and 2027. The tight cobalt supply-demand situation is expected to persist, ensuring strong business growth certainty and supporting continued strength in cobalt prices. This year marks the first time the company has provided gold production guidance. We look forward to a significant increase in its future gold output, which should boost operating revenue. We have raised our revenue forecasts for the company, projecting revenues of RMB 224.192 billion, RMB 238.708 billion, and RMB 247.559 billion for 2025, 2026, and 2027, respectively. EPS is forecasted at RMB 0.95, RMB 1.15, and RMB 1.28, with BVPS at RMB 4, RMB 4.8, and RMB 5.6. Applying a 2026 P/B multiple of 5x, we derive a target price of HKD 26.97 and maintain our rating to "Accumulate". 
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