Event: On August 29, 2025, China Shenhua Energy Company Limited released its interim report. In the first half of 2025, the company achieved operating revenue of RMB 138.109 billion, down 18.3% year-on-year, and net profit attributable to shareholders of RMB 24.641 billion, down 12.0% year-on-year; non-recurring net profit was RMB 24.312 billion, down 17.5% year-on-year. Net cash flow from operating activities was RMB 45.794 billion, down 11.7% year-on-year; basic earnings per share was RMB 1.24/share, down 12.0% year-on-year. In the second quarter of 2025, the company's quarterly operating revenue was RMB 68.524 billion, down 15.36% year-on-year; quarterly net profit attributable to shareholders was RMB 12.692 billion, down 5.62% year-on-year.

Commentary: Coal Segment: Significant Cost Control Results, Highlighting Profit Resilience. In terms of production and sales: In the first half of 2025, the company's commercial coal production was 165.4 million tons, down 1.7% year-on-year; coal sales volume was 204.9 million tons, down 10.9% year-on-year, of which self-produced coal sales were 161.9 million tons, down 3.4% year-on-year. In terms of pricing: In the first half of 2025, the company achieved a comprehensive coal selling price of RMB 493/ton, down 12.9% year-on-year; of which self-produced coal selling price was RMB 478/ton, down 9.3% year-on-year. By contract classification, annual long-term/monthly long-term/spot/pithead direct sales prices were RMB 461/563/544/213 per ton respectively, down 5.9%/22.3%/12.0%/31.9% year-on-year, with sales volume proportions of 55.5%/36.7%/4.1%/3.7% respectively. In terms of costs: In the first half of 2025, the company's self-produced coal cost was RMB 177.7/ton, down 7.7% year-on-year. The cost reduction mainly benefited from decreases in raw materials, fuel and power costs, and repair expenses. In the first half of 2025, the coal business gross margin was 31.3%, up 2.9 percentage points year-on-year, achieving total profit of RMB 21.762 billion, down 11.4% year-on-year. During the downward cycle of market coal prices, the company's cost control achieved significant results, demonstrating strong profit resilience in the coal business.

Power Segment: Fuel Cost Reduction and Capacity Pricing Offset Partial Impact. In terms of production and sales: In the first half of 2025, the company's total power generation was 98.78 billion kWh, down 7.4% year-on-year; total power sales were 92.91 billion kWh, down 7.3% year-on-year; average utilization hours for coal-fired units were 2,143 hours, down 8.8% year-on-year. In terms of pricing: In the first half of 2025, the company achieved an average electricity selling price of RMB 386/MWh, down 4.2% year-on-year. In terms of costs: Benefiting from declining coal procurement prices, average electricity selling cost was RMB 346.9/MWh, down 4.1% year-on-year. The power segment achieved total profit of RMB 5.087 billion, down slightly by 2.8% year-on-year; gross margin was 16.1%, up 0.4 percentage points year-on-year. Notably, the company obtained capacity electricity fees totaling RMB 2.53 billion (including tax) in the first half, providing strong support for power segment profits.

Transportation and Coal Chemical Segments: Railway & Port & Chemical Profitability Improved, Shipping Declined. Transportation segment: In the first half of 2025, the company's railway division achieved turnover of 15.28 billion ton-kilometers, down 5.3% year-on-year, but benefiting from cost optimization, gross margin increased by 2.8 percentage points year-on-year to 40.3%, achieving total profit of RMB 7.036 billion, up slightly by 1.6% year-on-year. The port division's gross margin increased by 3.0 percentage points year-on-year to 47.2%, achieving total profit of RMB 1.329 billion, up 9.7% year-on-year. The shipping division was affected by a 23.8% year-on-year decline in shipping freight volume, with total profit of RMB 114 million, down 48.6% year-on-year. Coal chemical segment: Benefiting from the low base effect of equipment maintenance in the same period last year, the company's polyethylene sales were 184,000 tons, up 24.2% year-on-year; polypropylene sales were 170,600 tons, up 22.6% year-on-year. The coal chemical segment achieved total profit of RMB 76 million, compared to RMB 1 million in the same period last year.

Asset Injection Resolves Industry Competition, Significantly Enhances Resource Reserves and Supply Security Capacity. In February 2025, the company completed the acquisition of 100% equity in Hangjin Energy held by China Energy Investment Corporation, which increased the company's coal reserves by 3.82 billion tons and recoverable reserves by 2.44 billion tons, significantly enhancing resource reserves. In August 2025, the company launched a new round of major asset restructuring, planning to purchase coal, pithead coal power, and coal chemical related assets held by China Energy Investment Corporation through share issuance and cash payment, aiming to fundamentally resolve industry competition issues and further improve the company's integrated operation efficiency and energy supply security capacity.

Quality Enhancement and Efficiency Improvement with High Returns, High Interim Dividend Rewards Shareholders. The company adheres to an active shareholder return policy. After distributing a final dividend of RMB 2.26/share for 2024 (payout ratio 76.5%), the board recommends paying an interim dividend of RMB 0.98 per share for 2025, accounting for 79% of net profit attributable to shareholders in the first half of 2025. The company has formulated a shareholder return plan for 2025-2027, committing to annual cash dividends of no less than 65% of annual net profit attributable to shareholders, and considering interim dividend implementation. The high-ratio, sustainable dividend policy demonstrates the company's high regard for shareholder returns.

Earnings Forecast and Investment Rating: The company's high long-term contract ratio and integrated coal-power-port-transport operations provide high stability to operating performance. Combined with asset injection opening growth space, under the background of high cash, high dividends, and high growth, the company's long-term investment value is evident. We expect the company to achieve net profit attributable to shareholders of RMB 50.394/52.507/53.175 billion for 2025-2027 respectively, with EPS of RMB 2.54/2.64/2.68 per share, maintaining a "Buy" rating.

Risk Factors: Uncertainty in macroeconomic conditions; geopolitical factors affecting the global economy; uncertainty in coal and power-related industry policies; safety production accidents in coal mines, etc.