Anxin International believes that the company's production this year will continue to recover, coal prices overall will remain relatively balanced, and profit margins will maintain a relatively good level.
According to the report released by Anxin International, it maintains a "buy" rating for Yancoal Aus (03668), believing that the company's production will further recover this year, coal prices will remain relatively balanced, and profit margins will maintain a relatively good level. For the company's EPS forecast for 2024/2025, it is respectively 1.05/1.19 Australian dollars, with a target price of 43.2 Hong Kong dollars.
The main points of the report are as follows:
In Q2, the equity output of commodity coal decreased slightly QoQ, while sales volume increased slightly QoQ, and inventory levels returned to normal.
The company's equity production of commercial coal in the second quarter of 2024 was 8.2 million tons, a slight decrease of 4% year-on-year and a slight decrease of 7% month-on-month. This was mainly due to the impact of weather, which resulted in more rainfall and adjustment of mining plans affecting production and operations. It is expected that the production of Hunter Valley and Mount Thorley mine will continue to recover in the second half of the year. In the first quarter, the company's inventory was high due to the impact of train derailments on rail transport. The inventory level in the second quarter has returned to normal. The full-year production guidance remains unchanged at 35-39 million tons.
The average selling price remains stable, and it is expected to maintain balance throughout the year.
The company's average coal price in the second quarter was 181 Australian dollars/ton, stable month-on-month. Since the third quarter of last year, the coal price has been relatively stable, and the impact of the high base is expected to weaken later. The supply and demand balance of the thermal coal market remains stable, and the demand continues to improve, but the inventory level of end users is still high. In the long run, the thermal coal market is relatively balanced. The price of metallurgical coal is also relatively balanced.
The cost guidance remains unchanged, maintaining a high level of profitability.
The company maintains a cash operating cost guidance of 89-97 Australian dollars/ton. The realized coal price in the second quarter was twice the lower limit of the cash cost guidance, indicating that the company still maintains a relatively good profit margin. The company is also a cost-competitive producer in Australia's industry, and has a large cash balance (cash balance as of June 30, 2024 was 1.55 billion Australian dollars), which will help the company maintain a strong ability to create cash and competitiveness in the current coal market conditions.
The dividend policy is attractive.
The company's dividend policy is to pay no less than 50% of after-tax net income (excluding non-recurring items) or free cash flow (excluding non-recurring items) for each fiscal year under normal circumstances.
Risks include lower-than-expected demand, rapid decline in coal prices, and lower-than-expected production and sales.