20230714-招银国际-兖煤澳大利亚-03668.HK-1H23E_preview__Expect_profit_decline_on_weak_coal_price_8页_1mb

Summary of Yancoal Australia (3668 HK) Company Update

• Earnings Preview:

  • Expected net profit for 1H23E to decline by 12% YoY to A$1.52bn, driven by weaker coal prices offsetting moderate volume growth. Revenue is projected to drop 6% YoY for 1H23E, primarily due to A$98/t unit operating costs (+15% YoY).

• Analyst Recommendation:

  • BUY rating maintained, with a target price of HK$42 (down from HK$48). This reflects the dividend paid and revised earnings forecast, yet the expectation of Chinese economic recovery and increased import of Australian coal supports the outlook.

• Valuation:

  • Stock trades at 21% 2023E dividend yield (50% payout) and 2.4x 2023E P/E. NPV-based target price is HK$42.

• Key Risks:

  • Further decline in coal prices, increase in unit costs, and unfavorable weather affecting production.

• Outlook:

  • ASP and volume trends reverse in 2Q23E: volume growth of 22% YoY expected due to water storage improvements, but thermal coal ASP down 30% YoY and metallurgical coal ASP down 33% YoY, though better contract pricing may mitigate overall decline. China's coal import from Australia is expected to accelerate post-import ban lift.

Yancoal Australia (3668 HK) is a key player with strong ties to Chinese market recovery, offering potential gains despite near-term challenges from coal prices.