A strategic multi-billion-dollar acquisition completed this month has given ASX 200 energy stock Whitehaven Coal Ltd (ASX: WHC) a significant advantage in the coal market, says one analyst.
Whitehaven shares are trading for $7.66 per share on Tuesday, down 1.35% for the day so far. The S&P/ASX 200 Index (ASX: XJO) is down 1.25% at 7,655.3 points.
Argonaut analyst, Harrison Massey, reckons Whitehaven's US$3.2 billion acquisition of the Daunia and Blackwater metallurgical coal mines from BHP Group Ltd (ASX: BHP) and Mitsubishi Alliance (BMA) has given the company new scale that few miners can compete with in the coal market.
Buy this ASX 200 energy stock, says expert
Argonaut analyst Harrison Massey is recommending investors buy this ASX 200 coal stock today.
As reported on The Bull, Massey points out that the two new mines are close to Whitehaven's existing operations and "should create synergies".
He said:
The acquisition will enhance the company's sales mix, with thermal and metallurgical coal production about evenly split.
In terms of size, Whitehaven has minimal competition, so the risk of any new big suppliers emerging in the short term is low.
Whitehaven managing director and CEO Paul Flynn reckons the acquisition is a "significant milestone" that will transform the company into a leading metallurgical coal producer.
What's next for coal prices?
Looking ahead, metallurgical coal commodity prices are forecast to hold up better than thermal prices.
The latest 5-year forecasts for commodity prices published by the Department of Industry and Resources show an expected average price of US$289 per tonne for metallurgical coal in FY24.
That's up from US$277 per tonne in FY23.
Meantime, the anticipated average FY24 price for thermal coal is forecast to be US$135 per tonne.
That's down dramatically from US$302 per tonne in FY23.
Looking ahead, both coal prices are expected to fall by FY29, along with many other commodity values.
The forecast price in FY29 is US$207 per tonne for metallurgical coal and US$115 per tonne for thermal coal.
What's next for the Whitehaven share price?
As this chart shows, Whitehaven shares have been trading between about $6 and $8 since February 2023.
The ASX 200 energy stock reached an all-time high of nearly $11 per share in late 2022 as a result of disrupted global energy supply chains caused by the Russian invasion of Ukraine.
That disruption caused the thermal coal price to scream to its own all-time high of US$457.80 in September 2022. The price tumbled dramatically through to June 2023 where it levelled out.
The thermal coal price has traded sideways since then to close last night at US$133.75 per tonne.
Demand from China and India is keeping coal prices reasonably strong by historical standards.
What do other experts think of this ASX 200 energy stock?
Michael Gable of Fairmont Equities says Whitehaven stock "looks cheap" following the acquisition.
UBS re-rated the ASX 200 energy stock based on the deal's completion and its positive outlook for metallurgical coal prices.
It has a buy rating on Whitehaven shares with an improved 12-month price target of $8.70.
