Now could be the time to sell New Hope Corporation Ltd (ASX: NHC) shares.
That's the view of analysts at Goldman Sachs, which think the ASX 200 mining stock could sink deep into the red.
What is the broker saying about this ASX 200 mining stock?
Goldman notes that New Hope released its full year results this week and delivered numbers at least in line with expectations. It said:
NHC reported FY24 underlying EBITDA of A$860mn (pre-reported) and headline NPAT of A$476mn, broadly in-line with GSe & Visible Alpha Consensus Data, and declared a final dividend of A22.0cps (above GSe at A17.8cps), representing an 80% payout. The Bengalla mine in NSW reported FY24 EBITDA of A$852mn broadly in-line with our A$845mn estimate, and the New Acland mine in Qld reported EBITDA of A$40mn, also broadly in-line with our A$49mn estimate.
As for the mining stock's long term guidance, the broker notes that volumes will be a touch higher than it was expecting. However, this is offset slightly by higher costs. The broker adds:
Five year and long term production guidance was updated, with volumes slightly higher than our estimates due to an assumed faster ramp-up of both the New Acland and Maxwell mines, with NHC targeting growth in saleable coal production from 9.1Mt in FY24 to slightly above 14Mtpa by FY28. Life of mine unit cost guidance has been provided for New Acland of ~A$91/t (Free on Board/FOB, ex. state royalties), which is above our modeled ~A$75/t estimate. However, targeted unit costs for the Maxwell underground mine of A$55/t (Free on Rail/FOR ex. state royalties), are below our modeled A$60/t estimate.
Time to sell
In response to the above, the broker has retained its sell rating and $3.80 price target on the ASX 200 mining stock. This implies potential downside of 16% for investors from current levels.
Goldman feels that its shares are overvalued at current levels and expects the thermal coal market to soften. It said:
Our global commodity team forecasts a ~40Mt surplus for 2024 due to decreasing global import demand, largely driven by a weakening outlook for Chinese imports and Japan/Korea/Taiwan heading into Oct/Nov shoulder season, and growing export capacity from Indonesia, Australia and Russia in 2H. We expect marginal cost to fall to US$100/t in 2H 2024 and into 2025. We forecast US$120/t for 6,000kcal NEWC benchmark in 2H24.
All in all, the broker believes this makes now the time to sell this miner's shares.
