| Item | Content |
|---|---|
| Rating | Neutral (Avoid Chasing the Rally) |
| Target Price | RMB 7.4–8.7 (base-case fair value range, midpoint RMB 8.0) |
| Current Price | RMB 9.39 (closing price, 2026-08-31) |
| Market Cap | Approx. RMB 33.87 billion (3.6075 billion total shares) |
| Margin of Safety | −21.2% ((base-case fair value lower bound 7.4 − current price 9.39) / 9.39; a negative value means no margin of safety) |
| Time Horizon | 12 months |
| Valuation Assessment | Moderately overvalued (current price is ~17.4% above the base-case fair value midpoint and ~13.4% above the probability-weighted fair value of RMB 8.28 across three scenarios) |
Huayang Co., Ltd. is China's largest listed anthracite coal producer, holding scarce resources in the Yangquan mining area in eastern Shanxi (resource volume of 6.566 billion tonnes, recoverable reserves of 2.933 billion tonnes). In 2026H1, net profit attributable to shareholders was RMB 1.062 billion (+35.63%). The Boli Mine (5 Mt/year) has entered trial joint operation, and the Qiyuan Mine has officially commenced production—the volume-and-price logic is genuinely improving. However, the current price of RMB 9.39 (closing on 2026-08-31) is largely priced on the sell-side consensus FY2027E (approx. RMB 2.89 billion attributable profit, ~11.7x), whereas our own estimate for 2026E attributable profit is only RMB 1.9–2.2 billion (15–25% below consensus). The current price is ~17.4% above the base-case fair value midpoint of RMB 8.0 and ~13.4% above the probability-weighted fair value of RMB 8.28 across three scenarios; downside to the bear-case midpoint is about −30.8%, while upside to the bull-case midpoint is about +20.3—odds are asymmetric. True leverage is underestimated (RMB 9.477 billion of perpetual bonds counted in equity; FCF negative for three consecutive years), and normalized ROE of ~7–9% is below WACC. Quality is above average, but the price is expensive—we recommend avoiding chasing the rally and reassessing allocation after a pullback to the RMB 7.4–8.7 range or upon confirmation of coal price/Boli ramp-up exceeding expectations.
Upcoming changes: ① The Boli Mine's trial joint operation (6 months from 2026-06-26) is expected to be completed and commissioned in 2026Q4–2027Q1, ramping up to 4–5 Mt in 2027; moreover, it is for now excluded from supply-security quotas and can be sold at fully market-based prices; ② Coal prices have recovered from the June 2025 low of RMB 615/t to spot prices of RMB 823–862/t in August 2026; the company's blended selling price rebounded to RMB 492.22/t in 2026H1 (+6.81%); ③ Ramp-up losses at the new Qiyuan/Kaiyuan/Boli mines (approx. −RMB 0.21 billion combined in 2026H1) are expected to turn into profit contributions from 2027 onward.
Primary share price drivers: Coal price central tendency (each ±RMB 50/t in blended selling price ≈ ±RMB 0.8–0.9 billion attributable profit) > Boli commissioning and ramp-up pace (a one-year delay at full production ≈ RMB 0.5–0.8/share lower base-case fair value) > Intensity of Shanxi safety-supervision production curbs (commercial coal sales volume already −8.44% in 2026H1).
Verifiable expectation gap: Negative. Market consensus for FY2026E attributable profit is RMB 2.53 billion (revised up 14.6% over the past 90 days; 21 Buy / 0 Sell ratings; median target price RMB 12.2), versus our own estimate of RMB 1.9–2.2 billion—the divergence lies in the production-restraining effect of safety supervision and the persistence of new-mine ramp-up losses. Back-solving from the current price implies normalized attributable profit of ~RMB 2.8–3.4 billion (midpoint ~RMB 3.1 billion), roughly 55% above TTM's RMB 1.982 billion.
Validation catalysts: Boli completion acceptance announcement (around 2026Q4), winter-peak coal prices (2026-11 to 2027-01), 2026 annual dividend proposal (2027-04). Falsification conditions: Quarterly blended selling price falls below RMB 470/t; Boli fails to complete acceptance within 2026; annual output falls more than 5% below the 38 Mt plan.
Key evidence
What needs correcting in the market narrative: a substantial portion of the +35.63% growth comes from a low base (2025H1 attributable profit was only ~RMB 0.783 billion) and improved cost structure from shrinking low-margin traded coal; the company itself attributes profit growth mainly to lower operating costs. The directional recovery in coal prices (safety-supervision supply contraction + falling imports) is real, but northern port inventories of 72.318 Mt, ~9.64 Mt higher year-on-year (2026-08-21), constrain winter-price elasticity. Earnings remain at a cyclical low (TTM attributable profit of RMB 1.982 billion, ~38% of 2023's RMB 5.179 billion).
Key evidence
At full production, the two mines would add ~RMB 0.5–0.8 billion in annual attributable profit (Boli at 70% equity after minority interests, net of ramp-up depreciation and financing costs), equivalent to 25–40% of 2026E attributable profit. But three constraints must be factored in: ① Qiyuan's ramp-up is hard-constrained by gas-control works; 2026H1 revenue was only RMB 257 million, and full-production timing may be 1–2 years later than the market narrative; ② Boli's 30% minority interest directly reduces attributable profit; ③ "Boli is for now excluded from supply security" is a point-in-time statement, not a permanent right—once commissioned, it could be incorporated into the supply-security/long-term contract system at any time, narrowing the market-pricing premium.
Key evidence
The "expensive" conclusion is directionally reliable, but the magnitude of overvaluation is sensitive to the anchor choice: on a PB-ROE discount basis (Huayang normalized ROE 7–9% vs. Shaanxi Coal's 17.9%), the fair multiple should be below 10x, implying real overvaluation possibly greater than 17%. Conversely, if coal prices hold above RMB 780/t and Boli reaches full production early, the bull case (RMB 10.5–12.5) could cover the current price. This report's independent judgment: our earnings estimate is 15–25% below the Street (consensus), while the Street's estimates have only been revised upward over 90 days with no public bearish coverage—in a crowded trade, consensus itself is the biggest source of downward-revision risk.
Key evidence
Perpetual bonds account for ~24% of attributable net assets; excluding them, ordinary shareholders' equity is ~RMB 27.58 billion. Normalized attributable profit of RMB 2.0–2.4 billion implies ordinary-equity ROE of ~7–9%, below the 9% WACC—absent further coal price increases, the tens of billions in reinvestment into Boli/Yujiazhuang generate weak returns for ordinary shareholders. The SOE background and long-term contract floor keep debt-servicing risk manageable, but the true leverage beneath the "cheap valuation + high dividend" narrative warrants a discount.
Key evidence
The qualitative direction is supported by hard evidence (an option, not a pillar), but the "35% growth premium" is a residual measure (current price − zero-growth EPV), highly sensitive to normalized earnings and WACC assumptions, and should not be cited as a precise figure; the standalone replacement value of 1 GWh of sodium-battery capacity and the 200 t carbon fiber demonstration line is far below RMB 11.8 billion (35% × market cap), and a substantial portion of that premium in fact corresponds to the coal capacity growth of Boli/Yujiazhuang—which is backed by output and reserve data; sodium batteries/carbon fiber are only the smaller part.
Key evidence
Three consecutive years of 50%+ payout is a credible shareholder-return commitment, but the absolute dividend level (2.5%) is only moderately attractive within the coal sector, making the "valuation floor support" weaker than it appears; moreover, perpetual bond interest ranks ahead of ordinary shares, so dividends have high downside elasticity in an earnings downturn. On governance, total encumbered shares of ~22.6% reflect group-level financing needs; combined with related-party purchases at 29.07% and related-party deposits at 47.7%, a valuation discount is warranted.
| Metric | 2023FY | 2024FY | 2025FY | 2026H1 |
|---|---|---|---|---|
| Revenue (RMB bn) | 28.518 | 25.060 (−12.1%) | 21.444 (−14.4%) | 9.921 (−11.7%) |
| Attributable net profit (RMB bn) | 5.179 | 2.225 (−57.1%) | 1.703 (−23.5%) | 1.062 (+35.6%) |
| Non-GAAP/adjusted attributable net profit (RMB bn) | 5.083 | 2.098 | 1.601 (−23.7%) | 1.033 (+25.3%) |
| Coal business gross margin | — | 40.22% | 42.60% (+2.38pp) | ~45.5% (broker estimate, unverified) |
| Net margin (attributable/revenue) | 18.2% | 8.9% | 7.9% | 10.7% |
| Operating cash flow (RMB bn) | 6.938 | 3.488 (−49.7%) | 3.179 (−8.8%) | 0.699 (+1249%) |
| Free cash flow (RMB bn) | 0.348 | −9.882 | −2.956 | −1.546 |
| Cash and equivalents (RMB bn) | — | — | 11.882 (end-2025) | 11.164 (2026-06-30, incl. 2.051 restricted) |
| Interest-bearing debt (RMB bn) | — | — | 26.306 (end-2025) | 27.392 (2026-06-30) |
| Debt-to-asset ratio | — | — | — | 52.13% (2026-06-30, unverified) |
| Net debt/EBITDA (incl. perpetuals) | — | — | — | ~4.4x |
| Cash dividend (RMB bn / payout ratio) | 2.590 / 50.0% | 1.115 / 50.1% | 0.855 / 50.2% | No interim distribution |
Reasons for metric changes (per company disclosures): 2024 attributable profit −57.05%, due to "coal mine safety production supervision and slowing coal market demand" causing output −16.41% and selling price −6.40%; 2024 investing cash flow −95.49%, due to RMB 6.8 billion paid for the Yujiazhuang block exploration rights auction; 2025 revenue −14.43%, due to blended selling price −RMB 113.75/t (−20.06%) reducing sales revenue by RMB 4.505 billion; 2026H1 operating cash flow +1249%, due to "reduced cash paid for goods and services" (traded coal shrinking)—a structural, not a core-operations cash-generation, improvement.
2026H1 revenue RMB 9.921 billion (−11.73%), attributable net profit RMB 1.062 billion (+35.63%), non-GAAP RMB 1.033 billion (+25.31%). The scissors gap of falling revenue and rising profit stems from: ① commercial coal sales −8.44% (purchased-coal consolidated sales shrinking, revenue quality improving); ② blended selling price +6.81% (coal price recovery); ③ per-tonne cost −9.14% (the "0+5" cost-reduction program continuing). Versus sell-side consensus: H1 attributable profit of RMB 1.062 billion annualizes to ~RMB 2.12 billion, ~16% below consensus FY2026E of RMB 2.53 billion—H1 delivery was slow, mainly because safety-supervision curbs restrained output (raw coal 20.33 Mt, −2.10%) and new-mine ramp-up losses (Qiyuan −RMB 66 million, Kaiyuan −RMB 141 million). Whether this is a "beat" is not for us to conclude, but after consensus was revised up 14.6% over the past 90 days, H2 needs coal prices sustained above RMB 490/t and Boli commissioned on schedule to catch up with full-year consensus.
Business model: Asset-heavy resource extraction—anthracite mining and washing accounts for 90.9% of core revenue; thermal coal under long-term contracts represents over 90% of rail sales (supply security and price stability institutionally dampen earnings volatility); lump coal/injection coal is market-priced with a scarcity premium; power (2×660MW low-calorific coal cogeneration + coalbed methane power) serves as peaking units at ~50% load factor; sodium batteries/carbon fiber/PV are incubating second curves. Selling prices are market-set (605.78 → 567.04 → 453.29 → 492.22 RMB/t), with no independent pricing power—earnings are essentially a function of coal prices.
Cash content of earnings: OCF/attributable net profit for 2023/2024/2025 was 1.34/1.57/1.87—high cash conversion of book profit (good long-term contract receivables, light working capital: receivables RMB 1.792 billion + inventory RMB 811 million against RMB 21.4 billion revenue). But FCF/attributable net profit for 2024/2025/2026H1 was −4.44/−1.74/−1.46—even reinvesting all profits wasn't enough; the expansion phase (Qiyuan + Boli + Yujiazhuang, over RMB 18 billion combined) is entirely funded by long-term borrowings + perpetual bonds. Non-GAAP vs. attributable differences were <5% each year, with no one-off items window-dressing; the company discloses no Non-GAAP measure and has no aggressive add-backs.
Return on capital: FY2025 estimated ROIC ~3.3% (NOPAT ~RMB 2.27 billion ÷ invested capital ~RMB 69.5 billion), significantly below the 9% WACC—the company is in a capacity-building deployment phase, with new-mine depreciation upon transfer to fixed assets + project loan interest suppressing current returns; on a normalized basis (attributable RMB 2.0–2.4 billion ÷ ordinary shareholders' equity RMB 27.58 billion), ROE is ~7–9%, also below WACC. This is the classic expansion-phase profile of "resources appreciating while shareholder returns wait."
Maintenance CapEx: CapEx/depreciation for 2023/2025/2026H1 of 2.99/3.15/2.13 (2024's 6.63 included RMB 6.8 billion of exploration rights), long-term significantly >1.5—but a distinction is needed: a substantial portion is growth investment (new mine construction), not maintenance spending; even excluding growth items, mine safety-standardization investment keeps maintenance capex on an upward trend.
Red flags: ① FCF negative for three consecutive years, reliant on rolling over perpetual bonds (RMB 9.477 billion and still issuing); ② early-stage losses at newly commissioned mines (Qiyuan/Kaiyuan combined ~−RMB 0.21 billion in 2026H1); ③ incubating businesses not yet contributing profit; ④ top five customers at 44.96% (Huaneng 19.55%), with related party Huayang Group among the top five suppliers at 29.07%.
Words-vs-deeds consistency: Partially delivered. ① Production targets consistently met or exceeded: 2025 plan of 38.00 Mt vs actual 41.61 Mt (+9.5%); 2026 plan of 38.00 Mt with H1 at 20.33 Mt (53.5% progress). ② Revenue target missed: 2025 plan of RMB 26.0 bn vs actual RMB 21.444 bn (−17.5%) — coal price decline exceeded expectations (an objective factor), but it reflects limited forecasting capability on prices by management. ③ Cost-reduction target delivered: 2025 unit coal cost of RMB 260.18/tonne (−23.25%), with the "0+5" cost-reduction program effectively executed.
Shareholder friendliness: Neutral to friendly. Payout ratio above 50% for three consecutive years, cumulative cash dividends of RMB 12.931 bn since listing, no share issuance/rights offerings dilution, no buybacks (rare anyway during a profit downturn). Deductions: RMB 9.5 bn of renewable corporate bonds issued intensively during 2024–2026 and classified as equity — formally not dilutive to share count, but substantively quasi-debt financing borne by common shareholders, with interest paid ahead of common dividends.
Risk signals: ① Large related-party transactions — RMB 5.327 bn on deposit with the group's finance company (47.70% of similar deposits; daily limit RMB 17.0 bn), and purchases from Huayang Group at 29.07%; the finance company's capital adequacy ratio of 39.49% and liquidity ratio of 66.54% currently meet requirements, but fund concentration is a genuine tail exposure. ② The controlling shareholder has pledged 7.64% of total shares plus ~15% of total shares held in brokers' margin accounts as financing collateral, indicating funding needs at the group level; Huayang Group was administratively penalized by the Shanxi securities regulator in September 2025 (the company disclosed it does not involve the listed company). ③ Frequent executive turnover: Deputy GM Li Jungang departed early in August 2026 (original term through November 2026); a director and a deputy GM also departed in 2025. ④ Xinjing Company's mining license transfer not yet completed (registered change not made after acquisition from the controlling shareholder), and Qiyuan/Boli mining rights pledged to China Development Bank — title defects require monitoring.
| Segment | 2025 Revenue Share | Gross Margin | YoY | Business Logic |
|---|---|---|---|---|
| Coal | 90.9% (core) | 42.60% (+2.38pp) | −10.93% | Anthracite mining & processing; long-term contract floor + lump-coal premium |
| Power | 8.8% (core) | 39.76% (+18.91pp) | −13.44% | Low-calorific coal CHP + coalbed methane power; peak-shaving units |
| Heating | 0.3% (core) | −46.15% | +23.61% | Livelihood heating; policy-driven losses |
| Trading etc. | 7.3% (total revenue) | Low margin | −50.28% | Active contraction of low-margin trading |
| New Energy & New Materials | Not separately disclosed | Not disclosed | — | 1 GWh sodium-ion batteries + 200 tonnes carbon fiber; incubation stage |
Profit driver: The coal segment, with 90.9% of revenue × 42.6% gross margin, contributes the vast majority of gross profit; the power segment (39.76% gross margin) is the second profit source but small in scale. Sodium-ion batteries/carbon fiber did not make the list of profitable subsidiaries. Spread between highest (power, 39.76%) and lowest (heating, −46.15%) gross margins is ~86 pp — the 18.91pp jump in power margin is mainly due to the low base after two units were shut down at end-March 2024 and lower fuel costs (revenue −13.44% but cost −34.12%); the company gave no separate explanation, so sustainability is questionable; heating losses are a policy-driven livelihood business with no economic significance.
Accounting red flags:
Inter-period consistency:
Overall: No earnings-fabrication-level financial engineering detected, but the perpetual bond accounting treatment and cross-period cost volatility require continued monitoring.
Reserves and production (2025 annual report basis, 100 mn tonnes):
| Mine | Coal Type | Resources | Recoverable | Proven |
|---|---|---|---|---|
| Qiyuan | Anthracite | 20.25 | 10.48 | 2.39 |
| Xinjing | Anthracite | 8.58 | 4.60 | 1.81 |
| Boli | Anthracite | 9.11 | 4.71 | 3.55 |
| No. 1 Mine | Anthracite | 7.02 | 4.17 | 0.91 |
| Yujiazhuang field | Lean coal/lean bituminous | 6.30 | Not disclosed | Not disclosed |
| Remaining 6 mines | — | 14.40 | 4.37 | 3.92 |
| Total | — | 65.66 | 29.33 | 12.58 |
Approved capacity of 45.90 Mt/yr (9 producing mines + Boli in trial operation); raw coal output 38.37 Mt in 2024 (−16.41%, safety supervision) → 41.61 Mt in 2025 (+8.43%) → 20.33 Mt in 2026H1 (−2.10%). Reserve replacement: Boli (+471 Mt recoverable) plus Yujiazhuang (630 Mt resources) provides clear succession; Boli's mine life is ~78 years.
Unit economics: Blended selling price 605.78 → 567.04 → 453.29 → 492.22 RMB/tonne (2023→2026H1); unit coal sales cost 295.62 → 338.97 → 260.18 RMB/tonne; unit coal gross profit 310 → 228 → 193 → ~224 RMB/tonne. Normalized unit gross profit set at RMB 190–200/tonne (midpoint of 193 actual in 2025 and ~219 in 2026H1). Costs are in the industry's leading tier (2025 unit cost decline of −23.25% exceeded the price decline).
Hedging and price sensitivity: No thermal coal hedging; long-term contract coal accounts for over 90% of rail sales (supply-security coal priced per NDRC policy; market coal at spot). Sensitivity estimate: ±10% price ≈ ±RMB 1.8 bn revenue ≈ ±RMB 940 mn attributable net profit (~55% of 2025) — coal price is the primary earnings variable.
Geopolitics and mining rights: Mines concentrated in Yangquan/Jinzhong/Xinzhou, Shanxi; after the "5·22" major gas explosion in Qinyuan (82 deaths), safety supervision tightened across Shanxi, and the company's interim report itself cites risk of phased production cuts/halts; Xinjing's mining right transfer is incomplete, Qiyuan/Boli mining rights are pledged to China Development Bank, and Yujiazhuang's exploration-to-mining conversion is in progress (a key Shanxi provincial project in 2026).
NAV perspective: Sum-of-parts — producing assets at TTM attributable RMB 1.982 bn × 9–10x ≈ RMB 17.8–19.8 bn; Boli (replacement-cost anchor) RMB 4.0–5.5 bn; Yujiazhuang (RMB 6.8 bn acquisition-cost anchor) RMB 6.0–6.8 bn; sodium-ion battery + carbon fiber options RMB 0.8–1.5 bn; total NAV ≈ RMB 28.6–33.6 bn, or RMB 7.9–9.3/share (midpoint ~RMB 8.55). Current price of RMB 9.39 implies ~10% premium to NAV midpoint — NAV provides ~90% support to the current price but offers no discount cushion.
Current market data: Share price RMB 9.39 (close on 2026-08-31), market cap RMB 33.87 bn. PE(TTM) 17.09x (83rd percentile of past 5 years; distorted at earnings trough — reference only); PE(static) 19.83x (95th percentile of past 5 years); PB 1.23x (55th percentile of past 5 years; common equity basis excluding perpetuals) — PB is the more meaningful anchor for this name.
Peer comparison:
| Company | PE(TTM) | PB | 2026H1 Attributable NP YoY | ROE (2025) | Key Differentiator |
|---|---|---|---|---|---|
| China Shenhua | 18.15 | 2.29 | +4.1% | 12.6% | Coal-power-rail-port-shipping integration |
| Shaanxi Coal Industry | 13.13 | 2.65 | +47.6% | 17.9% | Low-cost northern Shaanxi thermal coal |
| Lu'an Environmental Energy | 34.76 | 1.09 | +31.9% | 2.4% | Same region (East Shanxi), high PCI coal share |
| Yankuang Energy | 21.79 | 3.08 | +45.0% | 9.2% | High leverage + overseas exposure |
| Huayang Co. | 17.09 | 1.23 | +35.6% | ~7–9% (normalized) | Scarce anthracite + sodium-battery option |
Huayang's PB of 1.23x is below Shenhua/Shaanxi Coal/Yankuang and slightly above Lu'an, while its normalized ROE of 7–9% is below Shaanxi Coal's 17.9%/Shenhua's 12.6% — the PB discount and ROE gap are broadly matched; relative valuation is neither cheap nor outrageous.
Market-implied expectations: Current price of RMB 33.87 bn ÷ an independent anchor of 10–12x (Shaanxi Coal's 13.1x TTM discounted for ROE; Huayang's 5-year median PE of 8.8x marked up to a mid-cycle basis) → implied normalized attributable profit of RMB 2.8–3.4 bn (midpoint ~RMB 3.1 bn, EPS ~RMB 0.85). Reality: TTM attributable profit RMB 1.982 bn, 2025 recurring profit RMB 1.601 bn, with 2023–2025 declining year by year. The current price requires the company to soon reach ~RMB 3.0 bn attributable profit (~55% above TTM), i.e., "rapid Boli ramp-up + coal price midpoint no lower than RMB 750" delivered simultaneously; while the current run-rate is ~RMB 2.1 bn and new mines remain loss-making drags. The current price largely prices in consensus FY2027E (RMB 2.89 bn) with slight overshoot.
Three-tier value (EPV): Asset value (NAV floor) RMB 7.53/share; zero-growth EPV RMB 6.11/share (normalized EPS RMB 0.55, WACC 9%); current price RMB 9.39 − EPV RMB 6.11 ≈ RMB 3.28/share (~35%) as growth options (Boli + Yujiazhuang + sodium-ion/carbon fiber). EPV below asset value reflects normalized ROE below WACC — for a resource stock in expansion, zero-growth EPV is a floor, not a verdict; whether growth should be paid for is answered by scenario distribution: base case RMB 2.4 bn × 12x ≈ RMB 28.8 bn ≈ RMB 8.0/share, which the current price slightly exceeds.
Three scenarios and odds:
| Scenario | Fair Range | Probability | Key Driver |
|---|---|---|---|
| Bear | RMB 6.2–6.8 (midpoint 6.5) | 30% | Coal price back to 2025 lows (price ≤ RMB 453/t) + Boli loss-making from day one: attributable profit falls to RMB 1.4–1.7 bn; anchor = trough PB 0.85–0.95 × BPS RMB 7.6 |
| Base | RMB 7.4–8.7 (midpoint 8.0) | 50% | Boli at full capacity in 2027 + coal price midpoint RMB 750–780: attributable ~RMB 2.4 bn × 11.5–12.5x; 12x anchor = Shaanxi Coal's 13.1x discounted for ROE (independent of the company's own price), cross-checked by PB 1.05x |
| Bull | RMB 10.5–12.5 (midpoint 11.3) | 20% | Safety-driven supply contraction + demand surprise pushing coal above RMB 850 + Boli at full capacity: attributable RMB 3.2–3.6 bn × 11.5–12.5x, plus RMB 0.3–0.7/share of sodium-ion/carbon fiber order options |
The current price of RMB 9.39 sits at roughly the 75th–80th percentile between base and bull: downside to bear midpoint −30.8%, upside to bull midpoint +20.3% — odds skewed to the downside. Bear-case anchor note: the most pessimistic published forecast is Datong Securities' 2026E attributable profit of RMB 1.961 bn (77% forecast accuracy over the past three years), implying ~RMB 5.4/share at 10x; this bear-case floor of RMB 6.2 is slightly above that basis, as it still includes partial offset from Boli ramp-up and a 0.85x PB historical floor — an acceptable deviation. Base-case exit multiple of 12x: Shaanxi Coal's 13.1x TTM (ROE 17.9%) discounted to 11.5–12.5x on Huayang's ROE; Huayang's 5-year median PE of 8.8x marked up for a higher cyclical midpoint — anchor independent of the company's own price multiple.
House earnings forecast (alongside management guidance and sell-side consensus):
| Period | Revenue | Attributable NP | Key Assumptions |
|---|---|---|---|
| 2026E | RMB 19.5–21.2 bn | RMB 1.9–2.2 bn | Volume 38.00–39.50 Mt, price RMB 490–505/t, unit gross profit RMB 215–225, new-mine ramp-up losses a drag |
| 2027E | RMB 21.5–23.5 bn | RMB 2.2–2.6 bn | Boli at full capacity contributing 4.00–5.00 Mt, Qiyuan turnaround, price RMB 490–510/t |
Benchmark: Company's 2026 plan of 38.00 Mt/RMB 21.0 bn revenue; sell-side consensus 2026E RMB 2.53 bn/2027E RMB 2.89 bn — our forecast is 15–25% below consensus; the divergence lies in safety-driven output curbs and ramp-up speed.
Conclusion: Modestly overvalued. Quality is above average (scarce anthracite + clear resource succession + 50% payout ratio), but the current price has fully priced in the base-case delivery and paid a premium for growth options; safety margin is negative (−21.2%). Target price range RMB 7.4–8.7 (base-case fair value).
Industry Size: In 2025, national raw coal output was 4.83 billion tonnes (+1.2%, National Bureau of Statistics), imports were 490 million tonnes (−9.6%), and consumption grew only +0.1% — the industry is in a production plateau of roughly 4.8–4.9 billion tonnes. Using the Qinhuangdao Q5500 annual average price of RMB 703/tonne as a rough proxy, the national coal market is worth on the order of ~RMB 3.4 trillion (approximate estimate). From 2021 to 2025, output rose from 4.13 billion to 4.83 billion tonnes (a cumulative increase of ~700 million tonnes during the supply-guarantee cycle), but in 2025 thermal power generation fell −1.0% YoY — the first negative growth since 2016 — meaning the era of volume growth has essentially ended. Over the next 3–5 years, total volume will be flat to low-single-digit: the China Electricity Council forecasts +5~6% total electricity consumption for 2026, but new energy capacity is squeezing thermal power, so coal-for-power demand will only "grow slightly." The structural bright spot is coal chemicals (fuel-to-feedstock transition; 2025 caustic soda/fertilizer output +5.0%/+7.1%). Industry consensus is that coal consumption will peak during the "15th Five-Year Plan" period and enter a plateau (sources: China Coal Market Network CCTD / National Bureau of Statistics / China National Coal Association). Anthracite is a scarce sub-segment: it accounts for a single-digit share of national coal output, with ~45% of anthracite resources concentrated in the Jincheng and Yangquan mining areas (per United Credit Ratings); in 2025 anthracite imports were only 3.1% of total national imports, and new capacity is limited.
Value Chain and Value Distribution: Upstream comprises resources (mining/exploration rights) and mining equipment — resources themselves are the core moat; midstream comprises washing and processing (sizing into lump coal/PCI coal/fine coal) plus rail transport (Daqin and Shitai lines; Shanxi coal's delivered-to-port cost exceeds Shaanxi/Inner Mongolia coal, creating regional price spreads); downstream comprises power (2025 thermal generation 6.29 trillion kWh, −1.0%), chemicals (urea/methanol, core users of anthracite lump coal), and metallurgical injection (replacing coke). Huayang sits in the high-margin "mining + washing" segment: in 2025, per-tonne selling price was RMB 453.29, per-tonne cost RMB 260.18, per-tonne gross profit RMB 193.11, with a coal business gross margin of 42.6%. Bargaining power over downstream is moderate — anthracite lump/PCI coal commands stronger pricing power due to scarcity than ordinary thermal fine coal, but fine coal (~79% of sales volume) is priced at market and dampened by long-term contracts; there is no dependence on upstream third-party resources. Value accrues mainly at the mining and washing stage.
Supply-Demand and Competitive Landscape: On the demand side, 2026 thermal-coal baseload demand is underpinned (electricity consumption +5~6%, thermal power as ballast + renewables' output volatility forcing peak-shifting), and the coal-chemical boom creates rigid demand for lump coal; anthracite lump coal surged in 2026H1 (Jincheng low-sulfur small lump coal at RMB 1,210/tonne at end-June, up more than 30% from the start of the year). On the supply side, 2025 output hit a record 4.83 billion tonnes, but in 2026H1 national raw coal output contracted YoY under normalized safety supervision and the blanket inspection following the Qinyuan "5·22" mine disaster (July: −10.1%); ~60 million tonnes/year of disaster-mitigation-related output exited by end-2025; new mine approvals are tightening. On imports, Indonesia's export quota controls + raised DMO domestic-supply ratio + higher export taxes will cap import growth in 2026. The balance sheet shifts from loose in 2025 (port inventories repeatedly hitting record highs, coal price −18.4%) to tight balance or even tightness in 2026: 2026H1 Q5500 average price RMB 772/tonne (+13.1%), port inventories drawn down 13.5% from peak. Concentration: 8 coal-producing provinces (regions) with output above 100 million tonnes each account for 91.3% of national output (2025); the Jindong anthracite base is dominated by three groups — Yangquan (Huayang Group), Lu'an, and Jincheng (Jinneng Holding Equipment). Entry barriers are extremely high: resource barriers (anthracite new capacity is depleted), safety/licensing barriers (normalized safety supervision tightens the boundary of compliant capacity), and capital barriers (single-mine investment in the billions of RMB with construction periods over 5 years; Boli mine is a typical example). Substitution threats: the biggest long-term substitute is renewables displacing coal for power; PCI coal substituting for coke is a positive substitution (favoring anthracite/lean coal); in chemicals, gas-based/oil-based prices affect the economics of coal-based urea. Since late 2025, "anti-involution" policies have promoted capacity audits and industry self-discipline, reducing price-war risk.
Regulation and Cycles: Regulation has four main threads — ① Normalized safety supervision: after the May 2026 Qinyuan mine disaster, Shanxi conducted blanket inspections, and the new version of the "Standards for Determining Major Hidden Hazards in Coal Mines" took effect in July; ② "Anti-involution"/capacity audits: the treatment in 2026 of capacity that has not completed approval-increase procedures is a key variable, alongside building reserve capacity of over 90 million tonnes/year; ③ Long-term contract system: medium/long-term thermal coal contracts (Q5500 at ~RMB 686–701/tonne) cover the thermal coal base, with a policy range of RMB 570–770 dampening volatility; ④ Import policy: Indonesia's controls indirectly lift the floor of domestic coal prices. The overall direction is neutral to favorable — safety supervision + anti-involution reduce supply elasticity and support an upward shift in the coal price center (favoring incumbent resource holders like Huayang), but cap production growth; the long-term contract system reduces earnings volatility and supports the high-dividend thesis. (For cycle positioning and supply response, see the cycle perspective below.)
Cycle Perspective Supplement: The last three thermal coal cycles — 2016 supply-side reform (RMB 350→600+), 2016–2020 range-bound oscillation (RMB 550–700), and the 2021–2025 major cycle (October 2021 spot spiked to a record RMB 2,600/tonne → four-year decline → bottomed at RMB 615–620/tonne in June 2025, a peak-to-trough drawdown of ~76% over ~4 years). Current spot is RMB 823–862/tonne (August 2026), +34.8% from the low and −68.1% from the peak, at roughly the 40–50th percentile of the past decade — an early stage of "bottoming and recovery with a rising center," not a boom peak. Leading indicators: Bohai Rim port inventories of 24.92–28.68 million tonnes (−13.5% from peak, though absolute levels remain seasonally high), coastal eight-province daily consumption of 2.32 million tonnes (high summer level), long-term contract prices rising month by month to RMB 697–701, and Shanxi's safety-supervision/resumption progress. Over the next 2–3 years, the supply picture will be tight (rigid constraints on compliant capacity + low import elasticity), with downside price risk mainly from demand (hydro over-generation / renewables displacement). A normalized port Q5500 price of RMB 700–800/tonne is assumed, with a center of ~RMB 750–780 (average of cycle centers: ~RMB 861 in 2024, RMB 703 in 2025, RMB 772 in 2026H1 → ~RMB 779; the long-term contract anchor of RMB 570–770 provides floor support).
Sodium-Ion Battery Industry: 2026 is viewed in the industry as the first year of sodium-ion battery mass production — per CNESA, sodium battery demand will be ~110 GWh in 2026 (storage 82 GWh, two-wheelers 16 GWh, A00-class vehicles 17 GWh) and ~520 GWh by 2030; industry fundraising exceeded RMB 2 billion in January–July; CATL's "Naxtra" battery will enter large-scale mass production in 2026 across four segments — battery swap, passenger vehicles, commercial vehicles, and storage — with sodium and LFP per-kWh costs entering the same competitive range in 2026. Huayang's positioning is unique: producing coal-based hard carbon anodes from anthracite (a technology route pioneered globally by the Institute of Physics, CAS), with costs 40–50% below traditional graphite anodes, already supplying CATL; a minority stake in HiNa Battery ties it to a leading technology provider; it has built a full chain of "cathode/anode materials — cells — modules — storage systems." However, the company's 1 GWh capacity represents <1% of the 110 GWh industry demand expected in 2026 — an early positioning play rather than a volume-ramp beneficiary; its 16 MW/17.04 MWh sodium-battery mine emergency power system is already in actual use, and its mines have essentially achieved full sodium-battery emergency coverage — a differentiated use case, but still a small revenue contributor.
Peer Comparison:
| Company | 2025 Revenue (RMB 100M) | Net Profit Attributable (RMB 100M) | Revenue Growth | Gross Margin | ROE | Scale Rank/Differentiation |
|---|---|---|---|---|---|---|
| China Shenhua | 2,949.16 | 528.49 | ~ −13% | 32.2% | 12.6% | World's largest listed coal company, integrated |
| Shaanxi Coal Industry | 1,581.79 | 167.65 | −14.1% | ~37.9% (2024) | 17.9% | Northern Shaanxi low-cost thermal coal leader |
| Yankuang Energy | 1,449.33 | 83.81 | −7.5% | N/A | 9.2% | Record output of 182 million tonnes, overseas exposure |
| Lu'an Environmental Energy | 278.2 | 11.15 | −22.4% | N/A | 2.4% | PCI coal leader, heavy metallurgical exposure |
| Huayuan Co. | 214.44 | 17.03 | −14.4% | 39.45% (broker estimate, unverified) | ~7–9% (normalized) | Largest listed anthracite producer in China |
Industry Positioning: Leader/niche champion of the anthracite sub-segment — the largest listed anthracite coal company in China, holding scarce resources in the Yangquan mining area of Jindong, with 2025 output of 41.61 million tonnes growing against the trend (+8.4%) and combined Qiyuan + Boli capacity of 10 million tonnes/year under construction — a rising share trend. Moat sources: ① scarcity of anthracite resources and depletion of new capacity; ② industry-leading per-tonne cost control (RMB 260/tonne, −23%); ③ shareholder-return commitment of a 50% payout ratio. Relative to Shenhua/Shaanxi Coal, it is a "small but refined" high-beta play; relative to Lu'an Environmental Energy, its product mix is more balanced (lump + fine coal) with stronger earnings resilience (2025 net profit decline of −23% vs Lu'an's −54%). Its second curve in sodium batteries is uniquely positioned but currently contributes minimal revenue — option value rather than an earnings pillar. The stock is up +33.95% over the past year and +13.96% YTD, having partially priced in the cycle recovery and transformation expectations.
Overall Assessment: Neutral (avoid chasing highs), confidence 0.58, time horizon 12 months. Huayuan's "volume" (Boli + Qiyuan 10 million-tonne ramp) and "price" (upward shift in the coal price center) logic is real, resource succession is clear, and dividend discipline is credible — quality is above average; however, at the current price of RMB 9.39 (2026-08-31 close), the stock is already largely priced off sell-side consensus FY2027E, ~17.4% above the base-case fair midpoint of RMB 8.0, with a safety margin of −21.2% and a downside-skewed payoff distribution (−30.8% to the bear case vs +20.3% to the bull case). Perpetual bonds of RMB 9.477 billion counted in equity, persistently negative FCF, and normalized ROE below WACC form a second layer of constraint — capital returns during the expansion phase are weak. Strategically, chasing at the current price is not advised; a pullback to the RMB 7.4–8.7 range (base-case fair value) would turn the risk-reward positive and warrant re-evaluation; if the coal price center holds above RMB 780 and Boli reaches full output early, the bull case (RMB 10.5–12.5) could cover the current price, but the current probability is only ~20%.
Risk Factors: ① Another leg down in coal prices (a −20% price decline in 2025 drove net profit down −23.45%; northern port inventories are ~9.64 million tonnes higher YoY); ② production cuts/halts under tightened Shanxi safety supervision (multiple company mines have "extremely complex" hydrogeology; Qiyuan is an outburst-prone mine); ③ continued ramp-up losses at new mines (Qiyuan/Boli project loans exceed RMB 8 billion; total company guarantees of RMB 9.43 billion equal 26.09% of net assets); ④ perpetual bond rollover and dividend cuts; ⑤ related-party transactions and fund concentration with the Group (RMB 5.327 billion deposited with the finance company); ⑥ uncertain returns on sodium-battery/carbon-fiber transformation investments.
Monitoring Points: Boli completion acceptance announcement and mine-level output disclosures; monthly trends of Qinhuangdao Q5500 spot and annual long-term contract prices; the company's quarterly blended selling price (holding above RMB 470/tonne); timing of Qiyuan's turnaround to profitability; changes in perpetual bond balance and delivery of the dividend payout ratio; carbon-fiber equipment contractor qualification certification results; external sodium-battery orders.