Coal miner New Hope Corporation Ltd (ASX: NHC) released a quarterly production report this week, prompting the broker community to take a closer look at the company.
Interestingly, the brokers don't agree on whether the company is fully valued at the moment, with Macquarie breaking ranks with an outperform rating on the shares.
We'll have a closer look at some of the broker share price targets for New Hope shortly.
First, let's have a look at what they announced this week.
Image source: Getty Images
Robust production numbers
The company said in its quarterly report that its coal production was "strong", coming in at 4.3 million tonnes for the quarter, up 5% on the previous quarter.
Coal sales were 10.4% higher at 3.2 million tonnes, while the average realised price inched up from $139 per tonne to $140.70 per tonne.
New Hope said the underlying EBITDA for the quarter was $130.1 million, up 21.7% on the previous quarter, and the company had cash of $571.6 million.
The company said the conflict in the Middle East had been supportive of higher coal prices.
It said:
During the quarter, geopolitical conflict in the Middle East caused disruption and uncertainty to global energy markets. Global coal markets observed favourable price movements during the quarter, driven by concerns surrounding Middle Eastern LNG availability and shifting gas-to-coal for power generation. Japan, South Korea and Taiwan (JKT) increased coal imports, prioritising energy security amidst LNG supply disruption. Japan and South Korea have eased restrictions on older coal plants and postponed planned retirements. The Company anticipates increased demand in the coming quarter, as the Northern Hemisphere moves out of the shoulder season and into Summer. Looking ahead, the Group's forward sales book remains well supported with the majority of production for the next three months sold.
Broker dissent
In terms of the brokers that follow the company, both Bell Potter and Morgans have a hold recommendation on New Hope shares.
Bell Potter said they had increased their price target for the company from $4.50 to $5, after they applied "a 10% premium to our sum of the parts valuation with energy security concerns exacerbated by recent geopolitical issues''.
Their price target is still below the current share price of $5.44, however.
Morgans has a price target of $5.25 on the shares, up from $5 previously, saying New Hope "continues to be well-positioned to deliver low-cost, high-margin cash flow from its operations''.
They added:
We believe coal prices can rebound meaningfully above consensus over time, and NHC is positioned to capitalise, driving stronger cash flow and shareholder returns.
Macquarie, however, is an outlier with a bullish price target of $7 on New Hope shares.
Macquarie said:
Improving (stabilising) performance at Bengalla (hitting target run rates) and ongoing ramp-up at New Acland positions New Hope well in what could become a tighter market for thermal coal as global energy disruptions continue from the Middle East conflict.
