One area of the market that has come under significant pressure recently is the coal industry.
After delivering sensational gains in 2022, ASX 200 coal shares are firmly in the red year to date.
One leading broker that believes this has created a buying opportunity is Morgans.
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Buy ASX 200 coal shares
According to a note, the broker believes some of this weakness has been driven by dividend disappointment in February.
However, its analysts believe that coal miners were holding back in order to preserve capital for potential mergers and acquisitions (M&A) activities. And if no M&A eventuates or capital is leftover, Morgans suspects that these funds will find their way back to shareholders instead. It explained:
February dividends disappointed as feared/flagged as producers mainly appear to be withholding dry powder for M&A optionality. […] Windfall sector dividends have been delayed, not consumed, for most producers in our view. The most disciplined boards should duly reward shareholders with the spill-over of excess capital and/or disciplined growth.
In light of this, the broker sees plenty of value in ASX 200 coal shares at current levels. Here's a summary of its ratings:
Coronado Global Resources Inc (ASX: CRN)
Morgans has an add rating and $2.50 price target on Coronado Global's shares, which suggests 43% upside over the next 12 months. It is also forecasting a 12% dividend yield for investors.
New Hope Corporation Limited (ASX: NHC)
The broker currently has an add rating and $6.65 price target on New Hope's shares. This implies potential upside of 27%. Morgans also expects a massive 20% dividend yield from the miner.
Whitehaven Coal Ltd (ASX: WHC)
Finally, Morgans has an add rating and $10.35 price target on this ASX 200 coal share. This suggests potential upside of 53% for investors. Its analysts expect this to be complemented with a 10% dividend yield.
