Results Review
　　Maintain NEUTRAL
　　3Q19 earnings falling QoQ
　　Yanzhou Coal-A announced 1–3Q19 results: revenue rose 26% YoY toRmb151bn, and attributable net profit grew 27% YoY to Rmb6.98bn(or Rmb1.42/sh), in line with our expectation. In 3Q19, revenue wasRmb45bn (+4.1% YoY and -23% QoQ) and attributable net profit wasRmb1.62bn (+40% YoY and -47% QoQ). 3Q19 earnings declined QoQdue to a QoQ drop in coal volume and prices and rising unit cost.
　　Comments: 3Q19 sales of commercial and self-produced coal fell 6%and 6% QoQ to 22.38mnt and 21.46mnt. 3Q19 domestic output andsales of washed coal declined 17% and 20% QoQ to 4.23mnt and4.09mnt, and its proportion in self-produced coal sales volume fell to19% from 22% in 2Q19. 3Q19 ASP of self-produced coal declined 5%QoQ and 10% YoY to Rmb507/t due to lower proportion of washedcoal sold. Unit cost of self-produced coal rose 12% QoQ and 3.3%YoY to Rmb281/t. 3Q19 G&A, R&D and financial expenses increased24% or Rmb350mn QoQ in 3Q19. 3Q19 net income from investmentand fair value change declined Rmb620mn QoQ to Rmb260mn. The1–3Q19 effective tax rate fell 12.6ppt YoY due to changing deferredtax and taxable income at Yanzhou’s Australian subsidiary followingthe acquisition of Coal & Allied.
　　Trends to watch
　　Coal prices to remain stable in near term. While winter restockingdemand may gradually increase, we expect thermal coal prices toremain stable in the near term as domestic output expands andimports are unlikely to drop sharply.
　　Financials and valuation
　　We maintain our 2019 and 2020 forecasts for attributable net profitat Rmb9.05bn and Rmb9.32bn for A-shares, and Rmb9.24bn andRmb9.56bn for H-shares. A-share and H-share are trading at 5.8x and3.8x 2020e P/E. Maintain NEUTRAL for Yanzhou Coal-A/-H with TP atRmb12.50 (6.6x 2020e P/E with 14.4% upside) and HK$9.00 (4.1x2020e P/E with 8.6% upside).
　　Risks
　　Disappointing coal prices and/or coal demand.