In-Depth Assessment of Investment Risks and Performance Turnaround Timing for Meijin Energy (000723.SZ)

Based on the collected data and analysis, I will now prepare a systematic and comprehensive assessment report on the investment risks and performance turnaround timing of Meijin Energy for you.

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In 2025, the coal and coke market as a whole presents a loose supply and demand pattern, with prices experiencing in-depth adjustments. According to data from industry research reports, as of June 20, 2025, the coking coal price index stood at RMB 938.7 per ton, down RMB 342.9 from the beginning of the year, with a decline of 26.76%; the coke price index stood at RMB 1171.8 per ton, down RMB 473.5 from the beginning of the year, with a decline of 28.8%[1]. This price trend reflects the systemic pressure faced by the industry.

From the perspective of the full-year price operation rhythm, after experiencing a unilateral decline in the first half of the year, coking coal and coke prices saw a phased rebound starting from June driven by supply contraction. During July-August, the “anti-involution” and overproduction inspection policies took effect, leading to seven rounds of price increases for coke, with a cumulative increase of RMB 350 per ton, and the main contract hit an annual high of RMB 1800 per ton. However, entering the fourth quarter, the off-season of terminal demand, coke entered another price reduction cycle, with prices facing downward pressure[2]. This volatile price trend reflects the fragile balance in the market’s supply and demand game.

The current coking industry still faces the deep-seated contradiction of overcapacity. As of the end of November 2025, the national operating production capacity of metallurgical coke was approximately 565 million tons, of which the production capacity of coke ovens of 4.3 meters and below was approximately 52 million tons, and the production capacity of 5.5 meters and above was approximately 513 million tons. Since 2025, the national new production capacity has reached 15.77 million tons, with 16.82 million tons eliminated, a net decrease of 1.05 million tons; the full-year net increase is expected to be approximately 4.68 million tons[2]. The average capacity utilization rate of independent coking plants is about 73.51%, an increase of 3.2 percentage points compared with the same period last year, but the overall production capacity is still significantly higher than demand.

From a regional distribution perspective, Shanxi Province’s coking production capacity is approximately 114 million tons, accounting for 20% of the national total production capacity, ranking first in the country. In the first half of 2025, Shanxi’s raw coal output increased by 10.1% year-on-year, strongly supporting the national growth rate of 5.4%. In the price downward cycle, enterprises mostly maintain production to exchange volume for price, further exacerbating the loose supply situation[1].

The continuous advancement of supply-side structural reforms brings hope for marginal improvement to the industry. Shanxi Province clearly requires that by the end of 2023, all coking enterprises will fully realize dry quenching, complete ultra-low emission transformation, and completely shut down 4.3-meter coke ovens and other coke ovens that do not meet emission standards[3]. With the gradual elimination of 4.3-meter and below coke ovens, and the continuous tightening of environmental protection and energy consumption constraints, the industry will accelerate the clearing of backward production capacity. It is expected that with the gradual exit of small and medium-sized enterprises and the continuous optimization of production capacity structure, the market pattern is expected to be significantly improved.

However, it is necessary to prudently view the boosting effect of policy-driven capacity clearing on prices. From historical experience, the centralized shutdown of 4.3-meter coke ovens in Shanxi had a certain short-term impact on the Shanxi region, but had limited impact on the annual supply and demand structure[3]. The current production reduction of coal mines is mainly caused by safety supervision, environmental protection, and inventory overstocking, and there are not many coal mines that take the initiative to reduce production due to losses. It is expected that production will gradually recover.

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Meijin Energy released its 2025 performance forecast, expecting a net loss of RMB 850 million to RMB 1.25 billion (compared to a net loss of RMB 1.143 billion in the same period last year). The company’s 2025 semi-annual performance forecast shows that the net profit attributable to shareholders of the listed company is expected to be a loss of RMB 480 million to RMB 700 million, and the net profit after deducting non-recurring gains and losses is expected to be a loss of RMB 490 million to RMB 710 million[4]. The main reason for the company’s loss is that the prices of coal and coke have shown a downward trend due to market environment impacts, leading to continued pressure on the gross profit margin of the company’s main products.

From the perspective of financial data, the company’s TTM net profit margin is -6.95%, operating profit margin is -7.96%, and ROE is -8.77%[0]. The gross profit margin of the company’s coal coking business is only 2.36%, an increase of 0.91 percentage points compared to the same period last year, indicating that the gross profit margin has been extremely compressed under extreme price pressure. In the first half of 2025, the company achieved operating revenue of RMB 8.245 billion, a year-on-year decrease of 6.46%, of which the revenue from the coal coking industry was RMB 8.035 billion, a year-on-year decrease of 2.69%[5].

The company’s liquidity situation deserves high attention. The current current ratio is 0.44, and the quick ratio is 0.38, both far below the warning line of 1[0]. This data indicates that the company faces greater short-term debt repayment pressure and higher liquidity risks. Against the background of the industry’s downturn, tight liquidity may limit the company’s operational flexibility and risk resistance capabilities.

From the perspective of debt risk, financial analysis shows that the company’s debt risk is classified as “medium risk”[0]. Under the high-leverage operation model, if the industry downturn lasts too long, the company may face the risk of intensified debt pressure.

The company’s financial attitude is classified as “conservative”, mainly reflected in the high depreciation/capital expenditure ratio. This indicates that the company may adopt more prudent accounting policies under profit pressure, and historical investments have not yet fully released benefits[0]. Free Cash Flow has been negative for a long time (the latest FCF is -RMB 2.288 billion), indicating that the company’s cash generation capacity in operating activities is insufficient.

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Meijin Energy has actively transformed from a traditional energy enterprise to a comprehensive energy enterprise since 2016, and has fully laid out the hydrogen energy industry chain. Currently, the company is the only enterprise in the country that has formed an ecological closed-loop of hydrogen energy “R&D - manufacturing - commercial application”, with a full industrial chain layout of “production - storage - transportation - refueling - utilization”[4]. The company has 35 wholly-owned and holding subsidiaries, with total assets of over RMB 60 billion, and is one of the top 500 private enterprises in China.

However, the hydrogen energy business is in the cultivation period and has not yet formed large-scale profitability. In the first half of 2025, the company’s revenue from the hydrogen energy industry was RMB 211 million, a year-on-year decrease of 62.25%, with a gross profit margin of -15.85%[5]. The losses in the new energy vehicle and operation sector reflect that this business segment is still in the investment period and is difficult to contribute positive profits in the short term.

From a long-term perspective, the hydrogen energy business represents the company’s strategic transformation direction. Against the background of the “dual carbon” goals, the optimization of coking gas utilization methods and the development and utilization of hydrogen energy are important paths for the low-carbon transformation of the coking industry[6]. The company uses the high hydrogen and low carbon characteristics of coking gas to develop “carbon fixation” chemical products, with unique resource advantages.

However, it should be noted that the development of the hydrogen energy industry still faces challenges such as imperfect infrastructure, insufficient cost competitiveness, and long market cultivation cycle. Against the background of continued pressure on the traditional main business, the hydrogen energy business is difficult to make up for the profit gap of the coking main business in the short term, and investors need to fully anticipate the growing pains of transformation.

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According to DCF valuation analysis, the intrinsic value of Meijin Energy under three scenarios is: conservative scenario $24.84 (+408.0%), base scenario $24.65 (+404.1%), optimistic scenario $37.00 (+656.6%)[0]. The probability-weighted valuation is approximately $28.83, with an upside potential of 489.6% compared to the current stock price.

This valuation is based on the following core assumptions:

• Base scenario
  : Revenue growth rate of 10.3% (based on 5-year historical average), EBITDA margin of 17.0%, terminal growth rate of 2.5%, WACC of 10.1%
• Conservative scenario
  : Zero revenue growth, EBITDA margin of 16.1%, terminal growth rate of 2.0%
• Optimistic scenario
  : Revenue growth rate of 13.3%, EBITDA margin of 17.8%, terminal growth rate of 3.0%

The extremely low current stock price valuation (P/B 1.58x) reflects the market’s pricing of the company’s short-term difficulties. However, this valuation level also means that the market has already anticipated the following factors:

• The long-term nature of overcapacity in the coke industry
• Continued pressure on coking coal and coke prices
• Rising liquidity risk premium
• The hydrogen energy business is difficult to contribute profits in the short term

From a contrarian investment perspective, if the industry cycle reverses or the hydrogen energy business makes a breakthrough, the current valuation level may provide a good margin of safety. However, it is necessary to be alert to the risk of a “value trap” — that is, the valuation seems cheap, but the deepening of difficulties leads to a valuation trap.

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From a technical analysis perspective, Meijin Energy’s stock price has recently shown a sideways consolidation pattern. The current price of $4.89 fluctuates between the 20-day moving average ($4.79) and the 50-day moving average ($4.99)[0]. Key technical indicators show:

• Trend Judgment
  : Sideways/No obvious trend
• MACD
  : No crossover signal, slightly bullish
• KDJ
  : K value 67.4, D value 72.4, J value 57.4, death cross signal, slightly bearish
• RSI
  : In the normal range

The key price range is the support level of $4.79 and the resistance level of $4.95. The stock price has fluctuated within this range for a long time and is facing a directional choice.

From the analysis of volume-price relationship, the effective range for 2025 is $4.07-$5.85 (+43.73% range), with an average daily volatility of 2.30%[0]. The stock’s Beta coefficient is 1.04, highly synchronized with the Shenzhen Component Index. At the current price:

• Downside risk
  : If it breaks below the $4.79 support level, it may test the 200-day moving average of $4.67
• Upside potential
  : If it breaks through the $4.95 resistance level, it is expected to challenge the 50-day moving average and higher resistance levels

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: Coking coal and coke prices are dominated by the supply and demand pattern. Before overcapacity is fundamentally alleviated, prices may remain in a low-level fluctuation for a long time. “From a long-cycle perspective, we have not yet reached the real bottom, and it is expected that coking coal prices will continue to seek a bottom in the future”[1].

: A current ratio of 0.44 indicates that the company faces greater short-term debt repayment pressure, and attention should be paid to debt rollover pressure and cash flow management.

: With a gross profit margin of only 2.36% and a net profit margin of -6.95%, losses may expand if prices continue to decline.

: The hydrogen energy business is currently in a strategic loss period. If the transformation progress is slower than expected, it may extend the company’s difficult period.

: The stabilization or rebound of coking coal and coke prices is the direct driving force for performance turnaround. Focus on: (1) Active production reduction of coal mines due to losses; (2) Higher-than-expected downstream steel demand; (3) Supply optimization brought by contracted imported coal[2].

: Focus on the implementation effect of the company’s cost reduction and efficiency improvement measures, as well as the improvement of the industry pattern brought by the elimination of backward production capacity from 4.3-meter coke ovens[3].

: Focus on the continuous advancement of supply-side reforms in the coking industry, as well as the introduction of support policies for the hydrogen energy industry.

: Focus on positive signals such as breakthroughs in hydrogen energy business orders, improved capacity utilization, and reduced asset impairment losses.

Based on the comprehensive analysis of the industry cycle and the company’s fundamentals, the timing of Meijin Energy’s performance turnaround may depend on the following time windows:

Time Horizon	Trigger Conditions	Probability Assessment
Short-term (within 6 months)	Phased rebound of coking coal and coke prices	Medium
Mid-term (6-12 months)	Accelerated industry capacity clearing, eased supply pressure	Low
Long-term (over 12 months)	Industry cycle reversal + hydrogen energy business profitability	Subject to policy and market changes

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: High Risk

Meijin Energy is currently in the cycle trough of the coking industry, facing multiple pressures such as price declines, profit deterioration, and tight liquidity. Considering the long-term nature of industry overcapacity and the complexity of the company’s transformation, investors need to have a full understanding of the risks.

: It is recommended to wait and see. Wait for: (1) Stabilization signals of coking coal and coke prices; (2) Signs of improved company liquidity; (3) Confirmation of narrowed performance losses.

: (1) May deploy a small left-side position, focusing on the effectiveness of the $4.79 support level; (2) Set strict stop-losses to control downside risks; (3) Continuously track coke price trends and the progress of the company’s hydrogen energy business.

: (1) Spot price indices of coking coal and coke; (2) The company’s quarterly performance forecasts; (3) Changes in industry capacity utilization; (4) Order and revenue growth of the hydrogen energy business.

Scenario	Assumptions	Stock Price Performance	Probability
Optimistic Scenario	30%+ rebound in coke prices, breakthrough in hydrogen energy business	50-100% increase	20%
Base Scenario	Range-bound price fluctuation, narrowed losses	Range-bound fluctuation	50%
Pessimistic Scenario	Continued price decline, liquidity crisis	30-50% decline	30%

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As a leading enterprise in the coke industry, Meijin Energy is currently in the in-depth adjustment period of the industry cycle trough. The company expects a net loss of RMB 850 million to RMB 1.25 billion in 2025, reflecting the systemic pressure brought by the continuous decline in coking coal and coke prices[4]. From an investment perspective:

1. Risk aspect
   : The loose supply and demand pattern of the industry is difficult to reverse in the short term, and coke prices may continue to seek a bottom; the company has high liquidity risks (current ratio 0.44); the hydrogen energy business is difficult to contribute profits in the short term.

2. Value aspect
   : DCF valuation shows that the current stock price is significantly undervalued (with an implied upside potential of approximately 490%), but it needs to be supported by an industry cycle reversal; the technical side is in sideways consolidation, waiting for a directional choice.

3. Turnaround timing
   : Substantial performance turnaround requires the stabilization and rebound of coke prices, accelerated industry capacity clearing, and the formation of scale effects in the hydrogen energy business. There is a possibility of a phased rebound in the short term (within 6 months), but a trend reversal may take longer.

: Risk-seeking investors may consider small-scale left-side layout with strict stop-losses; risk-averse investors are advised to wait and see, waiting for clearer performance stabilization signals. In the current environment, “not investing” may be a rational choice unless investors have strong confidence in the industry cycle reversal and sufficient risk tolerance.

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[0] Jinling API Data - Meijin Energy financial analysis, valuation analysis, technical analysis data

[1] Galaxy Futures - “Supply-Demand Loose Pattern Continues, Double Coking Seeks Bottom Gradually” 2025 Semi-Annual Report (https://www.yhqh.com.cn/upload/cn/file/2025-06/col16/1751017672935.pdf)

[2] Tongguan Jinyuan Futures - “Double Coking Supply-Demand Stabilizes, Range-Bound Fluctuation Under Policy Constraints” 2025 Coking Coal and Coke Annual Report (https://pic-test-gjmetal-1324067834.cos.ap-shanghai.myqcloud.com/newsv2/e54b76a9cd8c4852a435541077c72f8420260109193039.pdf)

[3] Everbright Futures - “Impact of Shanxi 4.3-Meter Coke Oven Elimination on Fourth-Quarter Coke Prices” Special Report (https://www.cfachina.org/servicessupport/analygarden/hsjsl/jt_4531/202312/P020231227489358442584.pdf)

[4] Shanghai Securities News - “Meijin Energy: Expects Net Profit to be Negative in the First Half of 2025” (https://m.cnstock.com/commonDetail/468047)

[5] Shanxi Meijin Energy Co., Ltd. - “2025 Semi-Annual Report” (http://static.cninfo.com.cn/finalpage/2025-08-22/1224534826.PDF)

[6] Natural Resources Defense Council - “Research on Transformation and Development of Shanxi Coking Industry Under the Background of Carbon Peaking and Carbon Neutrality” (https://www.nrdc.cn/Public/uploads/2022-05-12/627cc4191bb02.pdf)

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: This report is for reference only and does not constitute investment advice. Investors should make independent judgments and prudent decisions based on their own risk tolerance. The cyclical fluctuations of the coking industry are affected by multiple factors, and forecasts have uncertainties.