China’s coal supply in 2023 is expected to exceed the original market forecast by 80 million tonnes and the forecast of thermal coal price in 2023 is lowered from 1,000 per tonne to 800 yuan per tonne and in 2024 from 900 yuan per tonne to 700 yuan per tonne, UBS said in a note.
However, the uptick of Yankuang Energy’s sales volume due to the recent asset injection should mitigate impacts from the decline in average selling price, it added. UBS upgraded rating on the stock of Yankuang Energy from Sell to Neutral, with its target price lifted from HK$10.6 to HK$14.
The contract sales exposure of China Shenzhua leads to lower earnings protection, while the stock’s higher valuation also makes it more prone to declining coal price, UBS said.
The broker downgraded rating on China Shenzhua’s stock from Neutral to Sell, with its target price cut from HK$23 to HK$20. The dividend yield was forecast to be 9% in 2023 and 2024, falling behind its H-share peers.