1 ASX 200 coal stock to buy and 1 to hold

Which one of these coal miners does Bell Potter rate as a buy?

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Are you looking for exposure to the coal industry for your portfolio? If you are, then Bell Potter has you covered.

This morning, the broker has named one ASX 200 coal stock to buy and one to hold.

Let's take a look at these stocks in detail now:

Coronado Global Resources Inc (ASX: CRN)

The ASX 200 coal stock to buy according to Bell Potter is Coronado Global Resources.

It is expecting the coal miner to report a strong quarterly update later this month. It commented:

Curragh's operational performance should have strengthened materially in Q2 2024, the first full quarter post substantial pre-strip investment over the past 24 months. We forecast Curragh mining costs of ~US$100/t (Q1 US$127/t) and saleable production of 2.8Mt (Q1 2.5Mt). At Buchanan, higher hoisting rates will provide an additional group production uplift. However, CRN's operational enhancements will be offset by a 21% qoq fall in the average quarterly HCC benchmark price.

In light of the above and its positive outlook of metallurgical coal, the broker has retained its buy rating and lifted its price target to $1.85 (from $1.60). Based on its current share price of $1.40, this implies potential upside of 32% for investors.

And while dividends are likely to be small this year, the broker expects a mammoth 10% dividend yield in FY 2025. It concludes:

Throughout 2024, CRN should realise improved production volumes and subsequent cost benefits following the self-funded investment across its Australian and US operations. We expect CRN to generate improved free cash flow and shareholder returns going forward. Our buy recommendation is underpinned by a supply constrained met coal environment, supporting long term prices. We see the potential for CRN to participate in industry consolidation.

Whitehaven Coal Ltd (ASX: WHC)

Bell Potter isn't feeling as positive about ASX 200 coal stock Whitehaven Coal due to its current valuation.

This morning, it has retained its hold rating but lifted its price target to $8.90 (from $7.70). This suggests that upside of just 2.7% is possible from current levels.

In addition, a 2% dividend yield is expected in FY 2024 and then a 3% yield is forecast for FY 2025. It commented:

WHC has diversified its commodity exposure and risk profile, through its ownership of large Queensland met coal assets. We hold a positive long term met coal outlook, driven by constrained supply and robust steel demand. While the company's free cash profile out to FY27 is restricted by significant acquisition-related cash outlays, we expect it to maintain a dividend payout of 20-50% of NPAT from its NSW operations. We retain our Hold recommendation in line with our recommendation structure.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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