China Shenhua Energy Company Limited (01088.HK, 601088.SH) released its third-quarter report on October 24, 2025. For the first nine months of 2025, the company reported revenue of RMB 213.151 billion, down 16.6% year-on-year (YoY), and net profit attributable to shareholders of RMB 39.052 billion, down 10.0% YoY. Adjusted net profit stood at RMB 38.704 billion, a 15.9% YoY decline. Operating cash flow dropped 19.9% YoY to RMB 65.253 billion, while basic earnings per share (EPS) fell 10.0% to RMB 1.965. In Q3 2025 alone, revenue declined 13.1% YoY to RMB 75.042 billion, with net profit down 6.2% YoY to RMB 14.411 billion.

**Coal Segment: Cost Control Drives Resilient Profitability** Production and sales: Coal output reached 251 million tonnes in the first nine months, down 0.4% YoY, while sales volume fell 8.4% YoY to 317 million tonnes. Self-produced coal sales dropped 1.3% to 249 million tonnes, and purchased coal sales plunged 27.5% to 68 million tonnes. Pricing: The average coal selling price declined 13.7% YoY to RMB 487/tonne, with annual contracts, monthly contracts, spot sales, and pithead sales priced at RMB 452, 553, 533, and 209/tonne, respectively (down 8.1%, 22.4%, 12.6%, and 29.9% YoY). These accounted for 53.2%, 39.3%, 3.7%, and 3.8% of total sales. Costs: Self-produced coal unit costs fell 7.5% YoY to RMB 173.2/tonne, driven by lower raw material, fuel, and safety expenses. Gross margin improved 1.1 percentage points (pp) to 30.5%, though total coal segment profit dropped 16.0% YoY to RMB 32.266 billion, demonstrating resilience amid declining market prices.

**Power Segment: Lower Fuel Costs Boost Earnings** Production and sales: Power generation and sales declined 5.4% and 5.5% YoY to 162.87 billion kWh and 153.09 billion kWh, respectively. Coal-fired utilization hours fell 9.7% to 3,520 hours. Pricing and costs: Average selling price dipped 4.5% YoY to RMB 382/MWh, while costs dropped 8.0% to RMB 327.5/MWh due to cheaper coal. Segment profit surged 20.4% YoY to RMB 10.142 billion, with gross margin up 3.5 pp to 19.2%.

**Other Segments: Mixed Performance** - *Rail & Ports*: Rail profit edged up 1.5% YoY to RMB 10.307 billion (margin +0.2 pp to 38.5%). Port profit jumped 23.0% to RMB 2.216 billion (margin +5.9 pp to 50.0%) on lower dredging fees. - *Shipping*: Profit halved (-50.1% YoY) to RMB 170 million due to lower freight volume. - *Coal Chemicals*: Polyethylene and polypropylene sales rose 15.7% and 12.1% YoY, driving a 354.5% profit surge to RMB 100 million (low base effect from 2024 maintenance).

**Asset Injection to Enhance Resources and Shareholder Returns** In August 2025, China Shenhua initiated a major restructuring to acquire 13 coal, pithead power, and chemical assets from parent company National Energy Group via shares and cash. This aims to resolve competition and boost integrated operations. The move is expected to enhance shareholder returns.

**Earnings Forecast & Rating** The company’s high contract ratio and integrated operations underpin stable earnings. With asset injections fueling growth and strong cash flow supporting dividends, long-term value is evident. Forecasts for 2025–2027 net profit are RMB 53.123 billion, 54.841 billion, and 55.724 billion (EPS: RMB 2.67, 2.76, 2.80). Maintain "Buy."

**Risks**: Macroeconomic uncertainty, geopolitical impacts, policy changes, and safety incidents.