The New Hope Corporation Limited (ASX: NHC) share price has been on fire this year.
Since the start of the year, the coal miner's shares have rocketed 145% higher.
Can the New Hope share price keep rising?
The good news for investors is that it may not be too late to snap up New Hope's shares.
According to a note out of Morgans, its analysts have retained their add rating with a slightly trimmed price target of $6.80.
Based on the current New Hope share price of $5.68, this implies potential upside of approximately 20% for investors.
What did the broker say?
While Morgans was a touch disappointed with New Hope's first quarter update, it remains positive and believes the market is undervaluing its shares. Particularly given that Acland 3 cash flows are not far away from being generated. The broker commented:
1Q (unaudited) EBITDA missed our forecast due mainly to a planned 3 week CHPP shutdown at Bengalla, reducing quality and price realisations temporarily. We think the market under-appreciates Acland 3 cash flows now only 12 months away.
Its analysts also like the company due to its dividends. In fact, Morgans believes a yield of 20% is possible based on current prices. It said:
We forecast accumulation of $1.4bn of net cash by end FY23 pre dividends and buybacks. If we exclude $250m as a balance sheet buffer then plausibly +$1.15bn ($1.22ps) is available for distribution via the announced buyback (up to $300m) and dividends. We think a forecast $1.00ps FY23 dividend forecast is fair, but of course will rely on actual earnings and the balance between actual pricing, NHC's view on value and therefore percentage of the buy-back actually executed.
Based on its forecast for a $1.00 per share fully franked dividend in FY 2023, this equates a 17.6% yield. And if you're able to put those franking credits to use, the gross yield lifts beyond 20%.
Morgans concluded:
We think that NHC can re-rate on: 1) abatement of abnormal selling post notes conversion; 2) recognition of approaching Acland 3 cashflow; 3) ongoing coal price resilience/ strength; and 4) clear capital management upside.
