【Guohai Energy】China Shenhua (601088) 2025 Annual Report Review: Cost advantage consolidates safety margins, asset injection opens growth potential

（Source: Morning View Energy）

Event:

On March 30, 2026, China Shenhua released its 2025 annual report: In 2025, the company achieved operating revenue of RMB 13.8B, year over year -13.2%; net profit attributable to shareholders of RMB 9.89B, year over year -7.3%; net profit attributable to shareholders after deducting non-recurring gains and losses of RMB 723.7k, year over year -19.2%; basic earnings per share of RMB 2.660/share, year over year -5.3%; annualized weighted average ROE of 12.76%, year over year -0.79 percentage points.

By quarter, in the fourth quarter of 2025, the company achieved operating revenue of RMB 190.3k, up 9.0% quarter over quarter; net profit attributable to shareholders of RMB 41.81B, down 4.3% quarter over quarter; and net profit attributable to shareholders after deducting non-recurring gains and losses of RMB 22.34B, down 31.3% quarter over quarter.

Investment highlights:

Coal mining and sales: In 2025, the company’s self-produced coal sales were basically stable year over year, while the unit selling price of coal and the unit cost of coal both declined year over year, showing excellent cost control. In 2025, on the volume side, the company achieved commodity coal production of 332 million tons, year over year -1.7%, and coal sales of 431 million tons, year over year -6.4%. Among them, self-produced coal sales were 332 million tons, year over year -1.6%, and purchased coal sales were 99 million tons, year over year -19.6%. On the price side, the unit selling price of self-produced coal was RMB 472/ton, year over year -9.4%. On the cost side, the unit selling cost of self-produced coal was RMB 283/ton, year over year -3.0%. The unit production cost of self-produced coal (with the main difference from unit selling cost being transportation expenses) was RMB 171.6/ton, year over year -8.6/ton (year over year -4.8%). This was mainly due to other coal costs such as costs for safety production, mine maintenance and rehabilitation, and costs for stripping open-pit coal mines decreasing year over year by RMB 12.3/ton (year over year -16.7%). On the gross margin side, the gross profit from self-produced coal was RMB 189/ton, year over year -17.3%. The gross margin rate for the coal segment was 30.1%, down 0.1 percentage points year over year. Quarter over quarter, in the fourth quarter, the unit selling price of self-produced coal improved and the gross profit per ton of coal was significantly optimized. In 2025 Q4, on the volume side, the company achieved commodity coal production of 81 million tons, down 5.03% quarter over quarter, and achieved coal sales of 114 million tons, up 2.51% quarter over quarter. Among them, self-produced coal sales were 84 million tons, down 3.69% quarter over quarter, and purchased coal sales were 31 million tons, up 24.19% quarter over quarter. On the price side, the unit selling price of self-produced coal was RMB 478/ton, up 5.1% quarter over quarter. On the cost side, the unit selling cost of self-produced coal was RMB 282/ton, up 1.2% quarter over quarter. On the gross margin side, the gross profit per ton of self-produced coal was RMB 197/ton, up 11.2% quarter over quarter. The gross margin rate for the coal segment was 29.1%, up 0.1 percentage points quarter over quarter.

Power generation: In 2025, the year-over-year decline in costs was greater than the year-over-year decline in prices; segment profitability improved year over year. The main power generation units under construction totaled 6,640 MW. In 2025, the company’s total power generation was 41.81B kWh, down 3.8% year over year; total electricity sales were 207 billion kWh, down 3.9% year over year. The electricity selling price was RMB 368/MWh, down 4.0% year over year. With the decline in coal procurement prices, the company’s average electricity selling cost (including heat sales) was RMB 334.7/MWh, down 6.1% year over year. The gross margin rate for the power segment was 18.0%, up 1.9 percentage points year over year. Regarding power generation units, in 2025 the company’s total installed capacity increased by 5,212 MW to 52,676 MW, and there are major power generation units under construction totaling 6,640 MW (as of end-2025).

Quarter over quarter, in the fourth quarter, total electricity generated and sold declined: in 2025 Q4, total power generation was 57.33 billion kWh, down 10.55% quarter over quarter; total electricity sales were 53.91 billion kWh, down 10.42% quarter over quarter. The gross margin rate for the power segment was 14.5%, down 9.2 percentage points quarter over quarter.

Other: Profitability of the railway/port/shipping and coal chemical businesses all showed recovery. Among them, the coal chemical business’ profitability in 2026 is expected to benefit from a rebound in polyolefin prices. In 2025, in the railway business, the company’s own railway transportation turnover volume was 313 billion ton-kilometers, up 0.3% year over year; the unit transportation price was RMB 139.7/10,000 ton-kilometers, up 1.1% year over year; and the unit transportation cost was RMB 86.8/10,000 ton-kilometers, up 1.0% year over year. In the port business, the company’s own port loading volume (Huanghua Port and Tianjin coal wharf) was 261.6 million tons, up 2.6% year over year. In the shipping business, freight volume was 111.3 million tons, down 14.3% year over year; shipping turnover volume was 114.9 billion ton-miles, down 23.1% year over year. In the coal chemical business, polyolefin sales were 7.237 million tons, up 12.06% year over year. For the railway/port/shipping/coal chemical segments, the gross margin rates in 2025 were 37.9%/46.7%/11.5%/7.2%, respectively, which were up 0.1 percentage points/+6.0 percentage points/+0.7 percentage points/+1.4 percentage points year over year. Since March 2026, affected by geopolitical conflicts in the Middle East, the month-average spot prices of polyethylene and polypropylene increased year over year by +14%/+16%, respectively. If the geopolitical conflict continues, the price of polyolefins in 2026 is expected to rise year over year, which may further enhance the coal chemical business’ profitability.

Quarter over quarter, in the fourth quarter, the shipping segment’s profitability improved quite noticeably. In 2025 Q4, in the railway business, the company’s own railway transportation turnover volume was 78.9 billion ton-kilometers, down 2.95% quarter over quarter; the unit transportation price was RMB 138.7/10,000 ton-kilometers, down 0.5% quarter over quarter; and the unit transportation cost was RMB 88.9/10,000 ton-kilometers, down 1.7% quarter over quarter. In the port business, the company’s own port loading volume (Huanghua Port and Tianjin coal wharf) was 63.3 million tons, down 8.13% quarter over quarter. In the shipping business, shipping freight volume was 31.4 million tons, up 4.67% quarter over quarter; shipping turnover volume was 32.5 billion ton-miles, up 8.70% quarter over quarter. In the coal chemical business, polyolefin sales were 1.903 million tons, up 6.43% quarter over quarter. For the railway/port/shipping/coal chemical segments, in 2025 Q3 the gross margin rates were 35.9%/37.3%/13.8%/7.6%, respectively, which were up 0.8 percentage points/-19.2 percentage points/+3.9 percentage points/+0.8 percentage points quarter over quarter.

Regarding dividends, in the 2025 interim period + proposed final-period distribution, the dividend amount is RMB 41.811 billion (including tax), corresponding to A-share/H-share dividend yields of 4.1%/4.7%. The company plans to use the total share capital of the company registered on the equity registration date for implementing the 2025 profit distribution plan after the completion of the issuance of shares to raise supporting funds as the base, and distribute the company’s 2025 final-period cash dividend of RMB 1.03 per share (including tax), corresponding to a dividend amount of RMB 22.340 billion (including tax). In 2025, the company’s interim period + proposed final-period total dividend amount is RMB 41.811 billion (including tax), the payout ratio is 79.1%. Based on the market value as of March 31, the corresponding A/H-share dividend yields are 4.1%/4.7%, respectively.

Asset injection opens up room for the company’s growth: As of March 30, 2026, the equity transfers related to the 12 target equity interests held by the controlling shareholder China Energy Group Corporation and West Energy, involving the issuance of A-share shares by the company and the payment of cash consideration to purchase them, have all been completed. According to the announcement released on February 13 by the company, this acquisition will increase the company’s coal-held resources by 64.72% to 68.49 billion tons, coal recoverable reserves by 97.71% to 34.5 billion tons, coal production by 56.57% to 512 million tons, power generation installed capacity by 27.82% to 60,881 MW, and polyolefin production capacity by 213.33% to 1.88 million tons per year.

Profit forecasts and valuation: Without considering the asset injection, we expect the company’s operating revenues for 2026–2028 to be RMB 300.4/312.2/325.7 billion, respectively; net profit attributable to shareholders to be RMB 58.2/61.2/64.5 billion, respectively, representing year-over-year +10%/+5%/+6%. EPS is expected to be RMB 2.74/2.88/3.04, and the corresponding current stock price PE multiples are 17/16/15 times. The company has the integrated advantages of a “coal-power-railport-shipping” industrial chain; the proportion of long-term coal sales contracts is high, and performance is steady. It places long-term emphasis on investor returns, with a high dividend payout ratio. Under the state-owned enterprise’s market value assessment, the valuation is expected to further improve. Maintain a “Buy” rating.

Risk warnings: Risk that economic demand falls short of expectations; risk of safety production accidents; risk related to the company’s management and operations; risk that the intensity of policy regulation exceeds expectations; risk that the timeline for asset acquisition falls short of expectations; risk that coal prices fall more than expected.

Securities research report “China Shenhua (601088) 2025 Annual Report Review: Cost advantages build a strong margin of safety; asset injection unlocks growth potential”

External release date: April 1, 2026

Publishing institution: Guohai Securities Co., Ltd.

Research analyst of this report:

SAC filing number: S0350522110007

Contact person for this report:

SAC filing number: S0350125070001

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