China Shenhua’s third-quarter profit was broadly flat: coal earnings grew, while power generation profit came under pressure
Higher coal prices drove a 18% increase in coal segment profit, but rising fuel costs cut power generation profit by 63%; HSBC believes spot coal prices may have peaked.
Original source：The Hongkong and Shanghai Banking Corporation LimitedFirst published on Unhidea：Original source date：
Key takeaway
China Shenhua’s coal business benefited from higher selling prices in the third quarter, while its power generation business was squeezed by fuel costs. Overall profit edged up, and operating cash flow improved significantly.
What changed in the third-quarter results?
China Shenhua earned 15.7 billion yuan in the third quarter of 2026, up 3% year on year and slightly below market consensus; operating cash flow rose 60% year on year to 38 billion yuan over the same period.
The simultaneous increase in coal segment profit and decline in power generation profit is key to understanding the company’s broadly stable overall profit.
Why did coal earnings rise, and why was power generation under pressure?
Third-quarter coal segment revenue rose 8% year on year: the estimated average selling price increased 13%, partly offset by a 3% decline in sales volume. Unit production costs fell 4% year on year to 162 yuan per tonne.
The coal segment’s pre-tax profit margin improved by 2 percentage points year on year to 19%, while segment profit rose 18% to 14.5 billion yuan.
The power generation segment was weighed down by rising fuel costs, with third-quarter segment profit falling 63% year on year to 2.031 billion yuan and its pre-tax profit margin falling 12 percentage points to 7%.
How much did the coal chemicals business improve?
Third-quarter coal chemicals revenue rose 92% year on year, its gross margin improved by 24 percentage points to 27%, and its pre-tax profit margin turned positive at 11%.
Sales of oil products and ethylene glycol reached 335 thousand tonnes and 81 thousand tonnes, respectively, increasing by 1.6 times and 1.5 times, respectively; olefin sales rose 15% to 558 thousand tonnes.
What changes lie ahead for coal prices?
National coal production rose 6% month on month in September 2026, with Shanxi and Shaanxi each increasing 6% and Inner Mongolia rising 5%. On that basis, HSBC believes the period of tightest supply may have passed and spot coal prices may have peaked.
However, as winter approaches, HSBC expects coal prices may fluctuate within a range around the current Qinhuangdao benchmark price for 5500 kcal thermal coal of approximately 1035 yuan per tonne.
HSBC rates both China Shenhua’s Hong Kong-listed shares and A-shares Hold, with target prices of 43 Hong Kong dollars and 49 yuan, respectively.
