Zhitong Finance and Economics APP has learned that First Shanghai has issued a research report stating a "buy" rating for Yancoal Aus (03668), with estimated net income of 1.32/1.38 billion Australian dollars for 2025/26, and adjusted the target price for 2025 to 36.65 Hong Kong dollars. The company's 2024 Australian production further recovered, and the international coal market demand is expected to improve in the second half of the year. Although coal prices experienced a significant decline in the first half of the year, it is expected to rebound slightly in the second half of the year. The international marine coal prices in 2025 will remain at the level of the second half of the year. The bank predicts that the company's net income attributable to the mother will be 1.173 billion Australian dollars in 2024, and the net income will remain stable and slightly increase in the future.

First Shanghai's main points are as follows:

The first half of the year performance was slightly lower than expected, and weak market demand led to a decrease in coal prices:

In the first half of 2024, the international coal market demand was weak, coal prices continued to decline, and the company's 1H performance decreased year-on-year. The company recorded annual revenue of 3.14 billion Australian dollars, a 21% year-on-year decrease. The net income attributable to the mother was 0.42 billion Australian dollars, a 57% year-on-year decrease, lower than market expectations. Mainly due to the decline in coal prices and production not meeting expectations, the company's average coal price for the first half of the year was 156 Australian dollars per ton for thermal coal, 319 Australian dollars per ton for coking coal, with an average coal price of 179 Australian dollars per ton, a 36% year-on-year decrease.

Production was lower than expected, with the prospect of substantial growth in the second half of the year:

Due to weather factors and the influence of objective mining conditions, production did not meet expectations. The company's sales volume of equity coal in the first half of the year was 16.9 million tons, an 18% year-on-year increase, including 14.8 million tons of thermal coal, a 24% year-on-year increase; and 2 million tons of coking coal, a 17% year-on-year decrease. Looking at the quarterly breakdown, Q2 coal sales volume was 8.6 million tons, a 4% increase compared to the previous quarter, with 7.5 million tons of thermal coal, a 3% increase; and 1 million tons of coking coal, essentially the same as Q1. Although there was a year-on-year increase in the first half of the year, the production and sales volume was still significantly lower than the level of the second half of the previous year. It is expected that in the second half of 2024, as the Australian rainy season passes and the workface is relocated, the company's production will return to historically high levels. The company is expected to have an annual equity sales volume of 36 million tons, within the company's guided range of 35-39 million tons.

Cash costs have slightly decreased, and there will be a significant improvement in the second half of the year.

Due to the decrease in production, the increase in raw material and labor costs, and the company's additional investment in machinery and personnel for production recovery, the company's cash cost in the first half of the year was 101 Australian dollars per ton, a year-on-year decrease of 7%. Among them, the basic cost of raw materials remained flat at 34 Australian dollars per ton; employee benefits remained flat at 23 Australian dollars per ton, while transportation costs and contract service fees decreased to 22 Australian dollars per ton and 17 Australian dollars per ton. The unit cost in H1 decreased slightly, thanks to the increase in production, but the company is still affected by the rising prices in Australia and labor shortages. It is expected that in the second half of the year, with further production release, the unit cash cost will significantly decline. It is expected that the company's unit cash cost in 2024 will be 95 Australian dollars per ton, within the guidance range of 89-97 Australian dollars per ton.

The company is strengthening its cash reserves in preparation for strategic expansion.

As of the end of 2023, the company has no interest-bearing liabilities, only leasing liabilities. And the company performed well in the first half of the year. As of the end of June, the company's operating cash flow was 0.85 billion Australian dollars, higher than its profit. The company held cash of 1.55 billion Australian dollars at the end of June. In order to further develop the company and create maximum value for shareholders, the company has chosen not to pay out dividends in the medium term and has retained cash as a strategic reserve for future growth through external acquisitions. The company has not changed its dividend policy, and the final annual dividend ratio will be determined by the board of directors.