Daqin Railway Co., Ltd. said near-term coal transport demand faces pressure as downstream power plants hold high inventories and coal output in Shanxi has declined, the company said at an interim results briefing on September 10.

Daqin Railway reported growth in both revenue and net profit for the first half of 2026, along with a significant improvement in operating cash flow.

The year-on-year decline in gross margin was mainly due to three factors, the company said. First, as part of a long-term strategic push into non-coal bulk markets, the company increased freight service fees as container and other businesses largely involve direct through-transport outside its network. Second, its transition to modern logistics, including multimodal transport, is still in a market cultivation phase, raising logistics auxiliary service costs. Third, labor costs rose under the wage mechanism as transport revenue and freight volumes increased year on year in the first half.

Management expenses fell sharply for two main reasons. First, the carryover of Party organization work funds exceeded 2% of the 2025 total wage bill, and under regulations on such funds for state-owned enterprises, no further allocation from management expenses is required for the year, cutting 76 million yuan from a year earlier. Second, amortization of production land was reclassified from management expenses to operating costs effective January 1, 2026, reducing management expenses by 51 million yuan from a year earlier. The company said these are long-term changes and expenses will remain at a reasonable level going forward.

While stabilizing its coal base, Daqin Railway made notable progress in expanding non-coal cargo in the first half, with container volumes up 28.1% year on year and coke volumes up 11.3%.

Daqin Railway said its transformation from a "coal transporter" to a "modern logistics service provider" is a strategic choice amid the energy transition. In the early stage, end-to-end logistics involves higher external coordination costs and resource integration, and new businesses require moderate concessions to gain market share, causing short-term gross margin fluctuations. The board has asked management to strengthen refined cost management and shift from scale-driven to efficiency-driven operations.

In the second half, Daqin Railway will prioritize thermal coal supply assurance, strengthen fulfillment of medium- and long-term coal contracts, stabilize its coal base, develop rail-suitable cargo, optimize freight products, adjust loading structure, advance freight logistics transformation, enhance passenger service diversity, and improve operational quality and efficiency.

On shifting road freight to rail and capacity, Daqin Railway said it will leverage policy support from central and local governments for rail operators, strengthen ties with bulk cargo producers and build long-term stable partnerships to keep cargo supply stable. In balancing capacity allocation, the company will meet customer demand with efficient services while ensuring each transaction is economically viable to maximize profit. It will fully utilize existing assets to boost volume, revenue and profit, and currently has no major investment or renovation plans.

Regarding recent market attention on Xinjiang coal blended in Shanxi, Daqin Railway said the first dedicated train of Xinjiang coal blended locally in Shanxi arrived at Qinhuangdao port via the Daqin line in August. The integrated logistics model of "Xinjiang coal into Shanxi, blending and quality adjustment, and sea-bound consolidation" extends the rail logistics service chain, and through reasonable transport organization, the company's network capacity can meet the needs of the Xinjiang coal project and non-coal bulk transport.

Daqin Railway also said it values shareholder returns and has optimized dividend frequency, implementing interim dividends for three consecutive years. The 2026 interim profit distribution plan has been reviewed and disclosed, with a total cash dividend of 1.59 billion yuan, accounting for 37.35% of net profit attributable to shareholders in the first half of 2026.

On buybacks, a new repurchase plan was approved at the second extraordinary general meeting of 2026, and a repurchase report on buying shares through centralized bidding was disclosed on August 26, 2026. The company will implement the buyback at an appropriate time based on market conditions and strictly fulfill information disclosure obligations.