20230420-招银国际-兖煤澳大利亚-03668.HK-ASP_offset_the_decline_in_sales_volume_in_1Q23__Expect_improvement_in_volume_7页_1mb

Yancoal Australia (3668 HK) - Key Insights Summary

Yancoal Australia's 2023 first-quarter performance demonstrates resilience with a 35% year-on-year increase in average selling price (ASP) to A$347/t, offsetting a 24% year-on-year drop in sales volume to 5.9 million tonnes. This helped achieve approximately A$2bn in revenue, slightly up from the prior year. The company's strong balance sheet, with A$2.8bn in gross cash, supports ongoing operations, and production volumes are expected to improve sequentially as water storage issues improve. For 2023, guidance remains unchanged with attributable saleable production projected at 31-36mn tonnes and operating cash costs ranging from A$92-102/t.

Valuation maintains a BUY rating with a target price of HK$48, representing a 58.7% upside, based on a net present value (NPV) model incorporating long-term coal price assumptions of A$120/t for thermal and A$160/t for metallurgical coal, along with a 1% annual unit cost inflation and a WACC of 6.6%. Key risks include further declines in coal prices, unit cost increases, and unfavorable weather affecting production.

Dividend yield is expected to be attractive at 24% for 2023, drawing interest from Mainland China investors through Stock Connect inclusion, which has increased Southbound holdings to 1.48%. Fund inflows are anticipated due to scarcity value in the seaborne coal sector and low valuation metrics, including a P/E ratio of 2.1x for 2023.

Earnings summary highlights a net profit of A$3.576bn for 2023, with revenue projecting 10,386 AUDmn, supported by improved profitability metrics like ROE of 40.0% and dividend-friendly characteristics despite market volatility.