Morgans upgrades New Hope after stock 'unfairly sold off'
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The news: Analysts were broadly positive on New Hope Corporation after the coal miner reported an in-line earnings result, with a total dividend that comfortably topped estimates.
The numbers: Morgans upgraded New Hope from 'hold' to 'add', noting that the stock now trades at a 15% to 20% discount to fair value. However, it reduced its 12-month target price from $5.45 to $5.20.
Macquarie maintained its 'neutral' rating but lowered its target price 2% to $4.20, due to "lower-than-expected cash" impacting its valuation in future period.
Bell Potter kept its 'hold' recommendation but cut its target price from $4.70 to $4.60.
Morningstar retained its fair value estimate of $6.10, but increased its coal sales forecast for FY25 from 10.3 million metric tons to 10.7 million due to higher guided production at New Hope's New Acland mine.
New Hope shares were up 1.85% to $4.40 at market open, extending Tuesday's gains as it closed 2.47% higher despite reporting a profit and earnings slide for the 2024 financial year.
The miner's total dividend of 39 cents, which included a final dividend of 22 cents, was 22% higher than consensus estimates, according to Visible Alpha data.
The context: Morgans analysts said New Hope's full-year results had few surprises outside of the dividend, which slightly beat their estimate. Their upgrade was primarily due to the stock being "unfairly sold off amid steel market bearishness".
Macquarie analysts flagged that New Hope's management indicated that it is "constantly evaluating opportunities" in the coal sector, and news reports later emerged that the miner had submitted a bid for Anglo American's coal assets in Queensland.
Bell Potter analysts said they expect New Hope's low-cost operations to continue to underpin margins through the coal price cycle, funding capital expenditure commitments and supporting healthy fully franked dividends.
However, they anticipate a "limited organic production growth pipeline" and believe New Hope may participate in industry consolidation.
Morningstar described New Hope's full-year result as "solid", despite realised thermal coal prices declining 43% year on year to around $195 per metric tone.
The sources: Morgans research, Morningstar research, Macquarie research, Bell Potter research
