This study investigates the reservoir physical properties, present-day stress, hydraulic fracturing, and production capacity of No. 3 coal in the Shizhuang south block, Qinshui Basin. It analyzes the control of in situ stress on permeability and hydraulic fracturing, as well as the influence of geo-engineering parameters on coalbed methane (CBM) production capacity. Presently, the direction of maximum horizontal stress is northeast–southwest, with local variations. The stress magnitude increases with burial depth, while the stress gradient decreases. The stress field of strike-slip faults is dominant and vertically continuous. The stress field of normal faults is mostly found at depths greater than 800 m, whereas the stress field of reverse faults is typically found at depths shallower than 700 m. Permeability, ranging from 0.003 to 1.08 mD, is controlled by in situ stress and coal texture, both of which vary significantly with tectonics. Hydraulic fracturing design should consider variations in stress conditions, pre-existing fractures, depth, structural trends, and coal texture, rather than employing generic schemes. At greater depths, higher pumping rates and treatment pressures are required to reduce fracture complexity and enhance proppant filling efficiency. The Shizhuang south block is divided into five zones based on in situ stress characteristics. Zones III and IV exhibit favorable geological conditions, including high porosity, permeability, and gas content. These zones also benefit from shorter gas breakthrough times, relatively higher gas breakthrough pressures, lower daily water production, and a higher ratio of critical desorption pressure to initial reservoir pressure. Tailored fracturing fluid and proppant programs are proposed for different zones to optimize subsequent CBM development.