The New Hope Corporation Limited (ASX: NHC) share price was on form again on Friday.
The coal miner's shares continued their impressive run with a 3% gain to $6.33.
That's despite the ASX 200 index falling 1.9% following a broad market selloff.
Today's gain means that the New Hope share price is now up a remarkable 173% since the start of the year.
Can the New Hope share price keep rising?
One leading broker believes the New Hope share price is now seriously overvalued following its strong run.
According to a note out of Goldman Sachs, its analysts have put a sell rating and $3.80 price target on the coal miner's shares.
This implies potential downside of 40% for investors over the next 12 months.
What did the broker say?
Goldman was pleased with New Hope's full year results release from earlier this week. It commented:
NHC reported FY22 underlying EBITDA of A$1.58bn (vs. unaudited $1.56bn pre-disclosed) for FY22 and NPAT of A$1.0bn, in-line with GSe and 1% ahead of VA consensus of A$992mn. […] NHC paid a final dividend of A56cps (incl. A25cps special), slightly below GSe of ~A60cps and took total payout to ~70% of NPAT. NHC stated they expect to continue paying special dividends but are also assessing share buybacks as they believe NHC stock is undervalued.
However, the broker doesn't agree with management on the New Hope share price being undervalued. It explained:
We rate NHC a Sell on: 1. Valuation: The stock is trading at c.2.0x NAV (A$3.00/sh) and is discounting a long-run thermal of >US$145/t (real) vs. our US$75/t estimate (based on our view of long run global marginal costs).
2. Only modest near term production growth: while NHC operates the low cost high margin 10Mtpa Bengalla thermal coal mine in NSW, the company has only modest production growth potential at Bengalla (which we already model), and its 5Mtpa New Acland Stage 3 (NAC3) project is still pending the final approval of the Associated Water Licence. At full production Malabar will only deliver 0.9Mtpa of met coal to NHC.
It is also worth noting that Goldman Sachs doesn't expect coal prices to remain as high as they are for too much longer. This could put pressure on its shares if its prediction proves accurate. It commented:
NHC expect thermal coal prices to remain at current/elevated levels (>US$400/t) for at least the next 6-12 months (vs. GSe US$200/t for CY23) and noted the upcoming Northern hemisphere winter as a driver.
