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.
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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."
