The New Hope Corporation Ltd (ASX: NHC) share price is in the red at midday trading on Wednesday, down 5.24% for the day so far. The shares are changing hands at $4.34 a piece.
The Australian thermal coal miner saw its share price jump 8% yesterday off the back of its FY25 financial results and production announcement.
For FY25, New Hope reported group saleable coal production of 10.7Mt, up 18.1% and within guidance range.
But weaker coal prices dragged down the miner's earnings for the year. Underlying EBITDA ws $765.8 million (FY24: $859.9 million) and net profit after tax was $439.4 million (FY24: $475.9 million).
It seems that at the time of writing, the share price has simply returned to pre-announcement levels, but there could be more downside to come.
Over the year, the share price is 0.46% higher.
In response to the coal miner's results, Macquarie Group Ltd (ASX: MQG) sent a note to investors detailing its latest stance on the stock.
New Hope shares downgraded
In the investor note, the broker revealed it has downgraded New Hope shares to underperform and lowered its target price to $3.80. At the time of writing, that represents a potential downside of 12.4%.
"Incorporating the FY25 result and future production assumptions has resulted in mixed earnings changes with earnings down 8%/3% for FY26E and FY27E while EPS (earnings per share) changes are less than 2% for FY28E and beyond," Macquarie analysts said.
"Our target price has decreased 5% to A$3.80ps due a lower Malabar valuation and weaker short term earnings outlook.
"Whilst we see merit in a yield maximisation strategy, we downgrade to Underperform on a weaker production outlook and earnings outlook."
What else did the broker have to say?
Macquarie analysts called New Hope's longer-term outlook a miss. They explained that the miner has outlined a growth path in its results presentation, with FY26/FY27/FY28/LT coal production at ~11.3/13.4/14.3/15 Mt.
This is weaker than the consensus expectations of FY26-28 equity production at 12.8/13.9/14.1 Mt.
"Incorporating the FY25 result and future production assumptions has resulted in mixed earnings changes with earnings down 8%/3% for FY26E and FY27E," Macquarie said.
But the broker also noted that it finds the dividend reinvestment plan "interesting".
"Rather than pursuing a buy-back, management has introduced a DRP that provides shareholders the option to reinvest. Given the A$784m franking credit balance, the move to weight distributions to dividends is prudent, allowing the stream to be fully valued."
