Yankuang Energy Group (HKG:1171, SHA:600188) faces rising debt as coal prices drop and its capital investments surge, S&P Global Ratings said in Thursday release.

The coal producer's debt-to-EBITDA ratio will increase to between 3.3x and 3.6x from 2025 to 2026, due to its expansion strategy and diversification into non-coal sectors, the rating agency said.

Although the company's rating remains tied to parent Shandong Energy Group, which faces higher leverage, S&P expects the former's profitability to be pressured by weakening coal prices.

However, increased coal output and cost-cutting measures should partially counter these challenges, the rating agency said.