BOC International released a research report stating that steel mill profitability continues to face pressure, which is expected to lead to further weakening of coking coal prices in the short term. However, based on the strong gains in July, the bank has raised its benchmark coking coal price forecasts for 2025-2027 by 7% to 13%. BOC International believes that the current valuation levels of the mainland coal sector lack attractiveness and maintains an industry "neutral" rating.

The firm has downgraded China Coal (01898) to "sell" rating, as the company may record negative free cash flow this year. Management appears unwilling to increase the dividend payout ratio, with projected dividend yields for 2025-2027 reaching only 3.7% to 3.9%. The target price has been lowered from HK$7.39 to HK$7.21, and earnings forecasts for 2025-2027 have been reduced by 10% to 16% in response to latest coal price expectations.

Although the market currently expects domestic port coal inventory levels to be relatively low, which could provide support for winter spot thermal coal prices, considering that second-quarter price levels were weaker than expected, the firm has still lowered its full-year spot coal price forecast by 4%.

The firm also noted that China Shenhua (01088) demonstrated earnings resilience in its interim results. During the first-half coal price decline, its coal business unit profit decline was the smallest. BOC International maintains a "hold" rating with the target price raised from HK$32.18 to HK$39.48.