YAL’s net profit in 2023 came in at A$1.82bn, down 49% YoY but 5% above the consensus estimates. We are encouraged that YAL achieved >20% YoY unit cost reduction in 2H23, on the back of accelerated volume growth (3Q23: +28% YoY; 4Q23: +46% YoY). YAL declared final dividend (fully franked) of A$0.325/share. This, together with the interim dividend, implies a full-year payout ratio of 50.5% and ~13% yield based on the current price. We only slightly revise our NPV-based TP to HK$40 (from HK$42), as we have not trimmed our LT coal price assumptions (starting 2026E) despite resetting the earnings forecast in 2024E/25E (-38%/-49%) on lower coal price. The stock is still trading at <6x 2024E P/E under our new earnings forecast. Maintain BUY.
Key highlights on 2023 results. Revenue dropped 26% YoY to A$7.8bn, as the 13% YoY coal sales volume growth (to 33.1mt) was more than offset by the 39% YoY decline in blended coal ASP (to A$232/t). EBIT declined 52% to A$2.6bn due to operating de-leveraging. On the positive side, finance expenses substantially decreased 89% YoY to only A$53mn. Net profit dropped 49% YoY to A$1.82bn. In 2H23, revenue/net profit dropped 34%/54% YoY to A$3.8bn/A$846mn. As at end-2023, YAL had net cash of A$1.25bn, equivalent to ~15% of the current market cap.
Reduction of unit cost in 2H23. Based on our calculation, the unit cash cost (excluding royalties) increased 2% YoY to A$100/t in 2023. This implies that the unit cost was reduced 24% YoY to A$86/t in 2H23. The cost reduction was helped by production volume recovery (+37% YoY in 2H23).
2024E guidance: (1) Attributable saleable production: 35-39mn tonnes (up 5%-17% YoY); (2) operating cash cost (excluding royalties): A$89-97/t (-7% to +1% YoY); (3) capex: A$650-800mn (up 5%-29% YoY)
Key risks: (1) further decline in coal price; (2) rebound of unit cost; (3) unfavourable weather that affects production.