KIM ENG has maintained its 'buy' recommendation on Yanzhou Coal, saying its results announced last week were in line with the broker's forecasts.
Turnover rose 30.4 per cent to 6.35 billion yuan (about HK$5.95 billion) while net profit increased 25.86 per cent to 1.22 billion yuan.
Yanzhou Coal has contracts for sales of 39.26 million tonnes this year, with 14 million planned for export.
The sales target is 38 million tonnes. Kim Eng assumes a 1.8 per cent increase in export prices and 2 per cent decline in domestic prices.
The company believes a Japanese levy on thermal coal imports due in October will have minimal impact because Yanzhou will shift its product mix.
It also intends to optimise product mix, market flow, transport and port selection to increase efficiency and profit margin. Kim Eng has lowered its fair-value estimate to HK$3.90 because of its higher cost base, export market uncertainties and heavy capital expenditure this year. The stock is trading at a 22.5 per cent discount to Kim Eng's fair-value calculation.
