China Shenhua Energy Co Ltd , the country's largest coal producer, posted a 16.5 percent increase in first-half profit, buoyed by rising sales volume on the back of rising energy demand in the world's second-largest economy.

Shenhua said net profit for the first six months was 22.73 billion yuan ($3.56 billion) versus 19.51 billion yuan a year earlier, according to a statement on the Hong Kong Stock Exchange posted late on Friday.

The world's most valuable coal producer posted preliminary first-half results a week earlier, reporting a 16.1 percent gain in net profit, missing an expectation of 22.7 billion yuan from four analysts polled by Reuters.

The company's Hong Kong-listed shares have gained 2 percent since the start of the year, outperforming the Hang Seng Index's 14 percent fall.

Revenue surged to 100.69 billion yuan from 71.67 billion yuan a year earlier, led by a 43 percent increase in coal revenue and a 27.7 percent gain in energy revenue.

Shenhua, valued at $83 billion, is a top pick among analysts confident that the expansion of power plants in major river deltas and improvements to its railway transportation capacity bode well for long-term growth.

The integrated coal and power producer provides railway transportation services to the coal mining segment and external customers. It also has a port segment that provides loading, transportation and storage services to the coal mining segment.

Analysts are mostly bullish on the stock, with 28 ranking it a strong buy or buy, while three have a hold rating. There are no sell ratings.

Growth was not without risk, however, as strong upward pressure on production costs was likely to remain a factor. Rising materials and labour costs may continue to put pressure on profit margins, analysts said.

Chairman Zhang Xiwu said at the end of March that external factors were likely to increase margin pressure this year. ($1 = 6.390 Chinese Yuan)

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