Investment Rating - The report initiates coverage on Yancoal Australia (3668 HK) with a "Buy" rating and a target price of HKD 40.00, implying a 21.6% upside potential [1][4][47] Core Views - Yancoal Australia is a Chinese state-owned coal mining company with operations in Australia, producing both thermal coal for power generation and metallurgical coal for the steel industry [1] - The company is well-positioned to benefit from the rebound in demand, particularly from China, as trade cooperation between China and Australia strengthens [1][16] - Thermal coal prices are expected to remain supported due to ongoing geopolitical risks, increasing thermal power generation in China, and stable demand from other Asian regions [1][22] - Metallurgical coal prices are expected to follow the recovery in the steel market, supported by recent government measures to stabilize the real estate sector in China [2][27] - The company is expected to see a rebound in earnings by FY26, driven by higher thermal and metallurgical coal prices and increased thermal coal sales [3][37] Financial Performance and Forecasts - FY24 revenue is expected to decline by 12.6% to AUD 6.8 billion due to lower coal prices, with net profit attributable to shareholders expected to drop by 28.6% to AUD 1.3 billion [3][37] - FY25 net profit is forecasted to decline by 6.1% to AUD 1.2 billion, but a rebound of 5.4% is expected in FY26 to AUD 1.3 billion, driven by higher coal prices and increased sales [3][37] - Thermal coal sales are expected to grow at a CAGR of 6.8% from FY23 to FY26, reaching 34.6 million tons, while metallurgical coal sales are expected to recover slightly in FY25 and FY26 [31][34] - The company's unit cash operating cost (excluding royalties) is expected to increase from AUD 92/ton in FY24 to AUD 98/ton in FY26 [38] Sensitivity Analysis - A 1.0% change in thermal coal prices in FY24 would result in a 2.44% change in net profit, while a 1.0% change in metallurgical coal prices would result in a 0.62% change [3][40] - In FY25, a 1.0% change in thermal coal prices would impact net profit by 2.73%, and a 1.0% change in metallurgical coal prices would impact net profit by 0.65% [41] - For FY26, a 1.0% change in thermal coal prices would impact net profit by 2.66%, and a 1.0% change in metallurgical coal prices would impact net profit by 0.62% [41] Dividend Policy - The company has maintained a high dividend payout ratio, with FY22-23 payout ratios of 45.2% and 50.5%, respectively [42] - The dividend payout ratio is expected to remain at 49.8% for FY24-26 [42][43] Valuation and Peer Comparison - The company's FY25 P/E ratio of 7.0x is below the peer average of 7.1x, suggesting potential for higher valuation given the expected earnings rebound and increased export opportunities to China [47] - The target price of HKD 40.00 implies an 8.5x FY25 P/E ratio and a 21.6% upside potential [1][47] Operational Highlights - Yancoal Australia operates 7 mines in Australia, with a total annual production capacity of 70 million tons of raw coal and 55 million tons of saleable coal [17] - Thermal coal accounts for 77.0% of the company's coal sales revenue in 1H24, while metallurgical coal contributes 21.4% [17] - China is the largest revenue contributor, accounting for 33.2% of coal sales revenue in 1H24, followed by Japan (23.4%), Taiwan (16.7%), and South Korea (15.1%) [17][20]
兖煤澳大利亚：站在需求反弹的风口上