2025 results miss our expectations; 1Q26 results largely in line

Pingdingshan Tianan Coal Mining announced its 2025 and 1Q26 results. In 2025, revenue was Rmb20.5bn, and net profit attributable to shareholders fell 90% YoY to Rmb231mn, missing our and market expectations due to weak coal supply and demand conditions and dropped coal prices. In 1Q26, revenue was Rmb6.3bn. Attributable net profit fell 20.9% YoY but increased 350% QoQ to Rmb0.12bn.

Comments: Earnings under pressure due to weakened coal prices. Production and sales volume: In 2025, the firm's production and sales volume of commercial coal fell 9% and 10% YoY to about 25.06mnt and 24.41mnt. In 1Q26, commercial coal output dropped 0.15mnt YoY but increased 1.94mnt QoQ to 7.35mnt, and sales volume of commercial coal rose 1.2mnt YoY and 1.28mnt QoQ to 7.52mnt.

Prices: In 2025, ASP of coal fell 30% YoY to Rmb728/t, with ASP of coking coal dropping 28% YoY to Rmb1,262/t. In 1Q26, ASP of coal fell Rmb2/t YoY but rose Rmb20/t QoQ to Rmb761/t.

Costs and gross profit: Cost per tonne of coal fell Rmb167 YoY to Rmb570 in 2025, with gross profit per tonne dropping Rmb138 YoY to Rmb158. In 1Q26, cost per tonne of coal rose Rmb19 YoY and Rmb90 QoQ to Rmb635, with overall gross profit per tonne dropping Rmb22 YoY and Rmb70 QoQ to Rmb126.

Expenses declines YoY. In 2025, G&A, selling, financial, and R&D expenses were Rmb828mn, Rmb218mn, Rmb1.001bn, and Rmb664mn, changing -18%, +1%, -22%, and -34% YoY.

Cash flow under pressure; capex remained high. In 2025, the firm’s operating cash flow fell 74% YoY to Rmb1.5bn; capex stayed high at about Rmb5.7bn; liability-to-asset ratio was around 65%; and full-year dividend payout ratio was 60.6%. In 1Q26, the firm's operating cash flow fell 6% YoY to Rmb444mn; capex rose 2% YoY to about Rmb1.73bn; and liability-to-asset was around 66%.

Trends to watch

We are upbeat on the growth of coal prices in 2Q26. In April, prices of prime coking coal and one-third coking coal rose Rmb60 and Rmb50 MoM to Rmb1,690/t and Rmb1,510/t. We are upbeat on coal prices and the firm’s earnings recovery in 2Q26. In 2026, according to corporate filings, the firm plans to produce 30.24mnt of raw coal and 13.08mnt of clean coal (up 2.61mnt YoY).

Financials and valuation

Given the company’s performance is improving quarter by quarter and coal prices are on an upward trend, we cut our 2026 net profit forecast 14.4% to Rmb877mn and introduce our 2027 net profit forecast of Rmb1.02bn. The stock is trading at 24.3x 2026e and 20.9x 2027e P/E. As we roll over valuation to 2027 and the firm’s earnings will likely improve QoQ, we maintain an OUTPERFORM rating and our TP of Rmb9.5, implying 26.7x 2026e and 23.0x 2027e P/B and offering 10.2% upside.

Risks

Disappointing demand; higher-than-expected domestic production and imports of Mongolian coal.