Following an increase in thermal coal price forecasts, Macquarie lifts its valuation for
-Macquarie lifts forecast thermal coal prices, boosting earnings estimates for
-Price forecasts rise on market deficit and energy supply concerns
-The broker raises valuations for coal producers across the board
-Most brokers covering New Hope have a positive view
Shares of thermal coal miner
This comes as Macquarie's commodity strategy team raises its short and long-term price outlook for thermal coal due to a market deficit and the willingness of developed economies to pay a premium to secure energy supply.
The company produces thermal coal from its 100%-owned New Acland open-cut mine in
Over 2023-27 Macquarie's thermal coal price estimates rise by 38-114%, while the long-term price forecast rises by 43% to
The broker's FY23 and FY24 EPS forecasts for Overweight-rated New Hope rise by 34% and 163%, respectively, and by over 400% from FY25, albeit from a low base. As a result, Macquarie's 12-month target price for New Hope increases to
The coal price upgrades also have a material impact on forecast earnings for other producers with thermal coal exposure within Macquarie's research coverage.
The impact on Coronado Global Resources ((CRN)) is more modest as more than 90% of its revenue derives from metallurgical (met) coal, and the analyst only raises the target to
Macquarie's EPS forecasts for
While New Hope (like
The FNArena database has four broker ratings for New Hope with three Buys (or equivalent) and one Sell rating. The average target price is
Broker views on New Hope
Following fourth quarter results on
While a warmer-than-expected summer in the Northern hemisphere increased coal burn (air conditioners) and led to record high prices, the broker felt the end of summer would reduce overall demand. Whitehaven Coal is the broker's preferred exposure to thermal coal.
At the time, Citi did acknowledge the risk of a sustained EU gas crisis and higher-for-longer thermal coal prices.
By contrast, Morgans could see the potential for New Hope shares to drive higher following the fourth quarter results, once the market grasped the scope of cash flows and the potential for increased dividends. The broker's target was raised to
At New Hope's full year results on
Credit Suisse had previously suggested a dividend payout ratio of 45% of earnings would serve as a possible catalyst for a re-rate, and on cue, shares appeared to rally in response. While the broker's target slipped to
Goldman Sachs, not one of the seven brokers monitored daily in the FNArena database, retained its Sell rating following the FY22 results. This broker's target was raised to
The Sell rating was attributed to valuation concerns and the broker's view of only modest production growth potential at the Bengalla operations on top of delayed approval for a water licence for the New Acland Stage 3 project.
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