Morgan Stanley has released a research note stating that CHINA SHENHUA (ASX: 01088) anticipates its net profit for the first half of 2026 to increase by 7% to 21% year-on-year, reaching between 26.3 billion and 29.8 billion yuan, surpassing the bank's forecast of 26 billion yuan.

This implies its second-quarter net profit will range from 15.6 billion to 19.1 billion yuan, representing a year-on-year increase of 23% to 51%, which also exceeds expectations.

Following the consolidation of 11 assets injected by the group, and on a restated basis, the company's first-half net profit is expected to change within a range from a 4.7% decline to an 8% increase year-on-year.

Morgan Stanley has reaffirmed its "Overweight" rating on CHINA SHENHUA (ASX: 01088), maintaining its H-share target price at HK$48.3.

The bank noted that the company's strong preliminary performance primarily reflects higher year-on-year coal prices, particularly in the second quarter, alongside increased profit contributions from its coal chemical, railway, and port operations.

Although coal prices have recently corrected due to decreased daily consumption at power plants caused by widespread rainfall and high port inventories, support for thermal coal prices is expected to continue as the rainy season concludes, peak daily consumption and power plant restocking demand emerge, coupled with ongoing supply constraints in major coal-producing provinces.

Consequently, CHINA SHENHUA's (ASX: 01088) profitability is anticipated to remain robust in the third quarter.