Yancoal’s (YAL) net profit came in at A$163mn in 1H25 (-61% YoY) which is slightly below our expectation due to higher-than-expected effective tax rate.
　　YAL proposes interim dividend of A$0.062/shr, implying ~50% payout ratio which is consistent with YAL’s dividend policy. Meanwhile, YAL maintains the full-year guidance on sales volume, unit cost and capex. We maintain our full- year estimate as we expect (1) the coal price to rebound from the low base in 2Q25, driven by China’s “anti-involution” campaign; (2) an improvement of sales to production ratio starting from 3Q25E (following the logistical issue in 2Q).
　　Sitting on A$1.7bn net cash (~20% of the current market cap) together with a clear dividend policy, we see buying interest in case of any potential pullback of share price. Our NPV-based TP of HK$34 is unchanged. Maintain BUY. n Key highlights on 1H25 results. Revenue dropped 16% YoY to A$2.6bn, due to a 2% YoY coal sales volume decline (to 16.6mt) as well as a 15% YoY decline in blended coal ASP (to A$149/t). EBIT declined 56% YoY to A$259mn as a result of operating de-leveraging. Net profit dropped 61% YoY to A$163mn, due to a 5.4ppt YoY increase of effective tax rate (to 32%). Operating cash inflow dropped 44% YoY to A$473mn. As at end-Jun 2025, YAL had net cash of A$1.7bn. n Continuous unit cost reduction. The unit cash operating cost (based on saleable production, excluding royalties) in 1H25 was A$93/t, -8% YoY. We expect YAL to achieve similar cost reduction in 2H25E, driven by high utilisation rate. n 2025 full-year guidance unchanged: (1) attributable saleable production: 35-39mn tonnes (-5% to +6% YoY); (2) operating cash cost (excluding royalties): A$89-97/t (-4% to +4% YoY); (3) capex: A$750-900mn (up 6%- 28% YoY). n Key risks: (1) further decline in coal price; (2) rebound of unit cost; (3) extreme weather that affects production and delivery.