CHINA SHENHUA (ASX: 01088) shares advanced by nearly 3% in Hong Kong trading, following a positive earnings forecast for the first half of the year and a supportive analysis from Morgan Stanley.

At the time of writing, the stock was up 2.5% to HKD 43.46, with a trading volume of HKD 325 million.

The company recently issued a positive profit alert, indicating an expected net profit attributable to shareholders of up to RMB 31.9 billion for the first six months.

Morgan Stanley noted that the company anticipates its first-half 2026 net profit to increase by 7% to 21% year-on-year, reaching a range of RMB 26.3 billion to RMB 29.8 billion. This outperforms the bank's own forecast of RMB 26 billion.

This guidance implies a second-quarter net profit between RMB 15.6 billion and RMB 19.1 billion, representing a significant year-on-year growth of 23% to 51%, which also exceeds expectations.

According to Morgan Stanley, the robust preliminary results primarily reflect higher average coal prices compared to the same period last year, especially in the second quarter, alongside increased profit contributions from the coal chemical, railway, and port operations.

While thermal coal prices have recently experienced some pullback due to decreased daily power plant consumption amid widespread rainfall and high port inventories, Morgan Stanley expects prices to find support.

As the rainy season concludes, the release of peak consumption demand and the need for power plants to replenish their stockpiles, coupled with continued supply constraints in major coal-producing provinces, are likely to underpin thermal coal prices.

Consequently, Morgan Stanley projects that CHINA SHENHUA's profitability will remain robust into the third quarter.