What's new
Yancoal Australia released operating data for 1Q25:
Output remained at a historically high level in 1Q25. Equity commercial coal output rose 8% YoY and fell 2% QoQ to about 9.5mnt. Mount Thorley Warkworth and Hunter Valley Operations were the key contributors to growth. On a 100% basis, output at Mount Thorley Warkworth rose 27% YoY and fell 13% QoQ to 2.8mnt, and commercial coal output at Hunter Valley Operations grew 25% YoY and fell 5% QoQ to 3.5mnt.
Sales volume edged up YoY in 1Q25. Equity sales volume of self- produced commercial coal rose 1% YoY and fell 19% QoQ to about 8.4mnt. Equity sales volume of thermal coal fell 4% YoY and 19% QoQ to 7mnt, and that of coking coal rose 40% YoY and fell 22% QoQ to 1.4mnt. The company attributes the lower sales volume than output to its inventory replenishment and the postponement of some sales from March to April.
Coal prices fell in 1Q25. The comprehensive selling price of self- produced commercial coal fell 13% YoY and 11% QoQ to AUD157/t. The price of thermal coal declined 9% YoY and 11% QoQ to AUD145/t (1Q25 market price of 5,500kcal coal fell 18% YoY and 13% QoQ, and that of 6,000kcal coal fell 17% YoY and 23% QoQ). The price of coking coal fell 35% YoY and 10% QoQ to AUD218/t (the market price of prime coking coal at Australia’s Peak Downs down 40% YoY and 8% QoQ in 1Q25).
Cash remains ample. As of 1Q25, the firm's cash balance increased AUD140mn QoQ to about AUD2.6bn. It would still hold about AUD1.91bn in cash excluding the 2024 final dividend.
Maintains 2025 guidance. The firm maintains its annual equity commercial coal output guidance of 35-39mnt, cash operating cost guidance of AUD89-97/t, and equity capex guidance of AUD750- 900mn.
Comments
We are optimistic about the firm’s cost optimization. In 1Q25, the firm's coal output beat our expectations and was at a historically high level. Under such circumstances, the firm’s cost per tonne of coal further improved (according to the results report of the firm’s controlling shareholder Yankuang Energy, its cost per tonne of coal fell 16.98% YoY to Rmb482.69 in 1Q24), partially offsetting the impact of falling coal prices on the firm’s earnings, in our view.
We expect the firm's sales to remain solid. Due to Indonesia's new coal policy, Indonesian coal prices have remained relatively strong, while Australian coal prices have declined along with easing supply and demand conditions. We believe Indonesian coal is unlikely to enjoy a price advantage, and demand for Australian coal in the Asia-Pacific region may increase marginally. We believe this could provide a structural support for Australian coal sales.
Financials and valuation
We maintain our 2025 and 2026 earnings forecasts. The stock is trading at 7.5x 2025e P/E and 7.6x 2026e P/E. We maintain our OUTPERFORM rating and target price, implying 9.6x 2025e P/E and 9.7x 2026e P/E with 28% upside.
Risks
Disappointing cost improvement; sharper-than-expected decline in coal prices.