In the Hong Kong stock market, the coal sector continued to decline with several leading stocks falling. China Coal Energy (01898) dropped by 3.96%, closing at HKD 7.99; China Shenhua (01088) fell by 3.01%, closing at HKD 29; Shougang Resources (00639) decreased by 2.33%, closing at HKD 2.51; and Yanzhou Coal Mining (01171) slipped by 2.61%, closing at HKD 8.97.
Huatai Securities pointed out that due to the year-on-year decline in coal prices, the average net profit attributable to shareholders for companies in the coal sector decreased by 20.7% year-on-year in the first half of this year. Among them, thermal coal companies benefited from the stable sales of long-term contract coal, hence their profit decline was relatively smaller, while coking coal companies were more affected by fluctuations in production, sales, and prices. It is expected that in the second half of the year, leading thermal coal companies may maintain good profitability due to the higher proportion of long-term contract sales.
A research report released by BOC International also noted that as coal inventories dropped to the lowest level in six months and non-electric power industry demand rebounded, domestic thermal coal prices may strengthen. Additionally, as steel mills increase production and stockpile coking coal before the Chinese New Year, coking coal prices may have begun to rebound. Although BOC International lowered the earnings forecast and target prices for coal stocks, after the recent share price retreat, most coal stocks appear to be quite attractive.
