What's new
　　On January 20, Yancoal Australia released operating data for 4Q24:Output remained flat YoY but fell QoQ in 4Q24. Attributable saleablecoal output stayed flat YoY but fell 5% QoQ to about 9.7mnt. On a 100% equity basis, saleable coal output fell 13% YoY and 21% QoQ to 4.2mnt at Moolarben, due to the relocation of wells and mining areas, and the firm expects to resume production in February 2025.
　　Saleable coal output at Mount Thorley Warkworth declined 6% YoY and 3% QoQ to 3.2mnt, due to suspension of coal preparation facilities and fluctuating output ratio. However, the firm stated that these problems were resolved in 4Q24. Output at other major mines largely grew YoY and QoQ, with output at Hunter Valley Operations up 12% YoY and 16% QoQ to 3.7mnt, a historically high level.
　　Sales volume edged up YoY and stayed flat QoQ in 4Q24. Attributablesales volume of ex-mine saleable coal rose 3% YoY and remained flat QoQ at about 10.40mnt, with thermal coal sales volume down 1% YoY and 4% QoQ to 8.6mnt (accounting for 83% of the total), which we attribute to falling output at Moolarben. Attributable coking coal sales volume grew 29% YoY and 29% QoQ to 1.8mnt.
　　Selling price fell YoY but rose QoQ in 4Q24. The comprehensive sellingprice of ex-mine saleable coal fell 10% YoY but rose 4% QoQ to AUD176/t. We believe that the AUD-denominated selling price benefited from the appreciation of the US dollar. Specifically, the selling price of thermal coal fell 9% YoY but rose 4% QoQ to AUD163/t (market price of API5 in US dollar terms was down 8% YoY and up 1% QoQ, and market price of 6,000kcal coal was up 1% and down 2% in 4Q24). The selling prices of coking coal fell sharply by 17% YoY and 7% QoQ to AUD242/t (market price of prime coking coal in US dollar terms at Australia’s Peak Downs fell 39% YoY and 4% QoQ in 4Q24).
　　Cash reserves continue to increase. As of end-2024, the firm's cashbalance rose by AUD480mn QoQ to AUD2.46bn (vs. an increase of AUD430mn QoQ in 3Q24).
　　Comments
　　Cost guidance likely to be met. The firm's attributable saleable coal output reached 36.9mnt in 2024, in line with its guidance of 35–39mnt. Its guidance for full-year cash operating cost was AUD89–97/t, and the firm expects the actual cost to reach the median of the guidance range. In addition, the firm expects its full-year capex to reach the lower end of its guidance range of AUD650-800mn. We suggest watching the final dividend for 2024. The firm did not pay an interim dividend in 2024, but we expect a potential increase in final dividend given its ample cash. We suggest keeping an eye on the firm’s dividend payouts.
　　Financials and valuation
　　We raise our 2024 earnings forecast 3% to AUD1.10bn, reflecting lower ASP and cost assumptions, as well as the impact of Australian dollar depreciation. We lower our 2025 earnings forecast 5% to AUD1.15bn, driven mainly by reduced production and sales assumptions. We introduce our 2026 earnings forecast of AUD996mn. The stock is trading at 6.7x 2025e and 7.5x 2026e P/E for H-shares. Supported by the company’s potential to raise its dividend payout ratio, we maintain our OUTPERFORM rating and target price, implying 8.7x 2025e and 9.8x 2026e P/E for H-shares with 30% upside.
　　Risks
　　Output recovery disappoints; disappointing cost improvement; sharper- than-expected decline in coal prices.