I cut half my position in Yancoal this week. I came across this...

I cut half my position in Yancoal this week. I came across this stock on January 20 and I bought in immediately that day as it looked incredibly cheap. I bought 300k shares of Yancoal on 20 Jan and topped up to 500k in the days following.

Since I bought the Newcastle Coal June 2023 Futures Contract has fallen from 281.60 to 195.75 (down 30%). 5.5k I assume has fallen a similar amount. Metcoal seems to have been pretty steady. Overall this likely equates to around a 25% fall in projected revenues and a 50% fall in projected profits.

I would be interested to see other estimates for FY23 but I would assume roughly 33m tonnes (up from 29.4m in FY22) at a price of $240/t (down from $378/t in FY22). Based on costs around $94/t that means their gross margin drops from $266/t to $146/t. I think we are looking at a 30-50% drop in profit this year. Last year was 3.6b NPAT. This year, with coal prices where they are, looks like about 1.8-2.5b NPAT.

Current market cap is 8.8b so I see there Market Cap is trading at 3.5-4.9x Forecast FY23 NPAT. The EV / NPAT ratio is actually pretty similar as post paying the 0.9b dividend and 1.5b in tax they have roughly no cash left and they still have some debt to pay off too. Whilst 3.5-4.9x is obviously still cheap I think this stock has moved from the "very cheap" to the "cheap" category over the last couple months as the share price has managed to hold despite Coal markets having a major drawdown and all other coal miners getting belted.

I cut my half my position today around my entry price. I think if the stock can rally another 20-30% from here I would be happy to exit the rest.