[US-Iran Increasing Volatility, Sector Uptrend Unchanged, Key Recommendation] Guotai Haitong Coal - Huang Tao

English summary

We have been key recommending the coal sector since early July, predicting the inflection point in fundamentals and stock prices would appear around mid-July; but with US-Iran disturbance, recent sector volatility has increased, causing market concerns. 1) US-Iran disturbance affects the market, but the downside negative impact is limited. Recent sector volatility increased; our judgment is more from US-Iran geopolitical disturbance. The market sees energy crude oil, natural gas prices returning to highs from the March conflict, worries about increased probability of Trump TACO, and trades TACO early. Our view is clear: the market has no expectation of deepening US-Iran conflict; macro-hedging funds withdrew fully after the June peace talks, TACO's subsequent impact on the sector is limited, and the pullback provides better sector opportunities. 2) Current fundamentals are in a stage of building up, weather remains the short-term core. Since July, coal prices stopped falling and rebounded but entered a sideways phase; the core remains daily consumption at normal peak season but not new highs, coupled with still good hydropower output, downstream restocking willingness reduced. ...