Target $4.61, page-1292

From GS, July 18th through Commsec;

• Coal stocks - recovering earnings and remain undervalued: We also upgrade our EPS estimates, NAVs and TPs for the coal stocks under coverage and remain Buy rated on CRN, WHC (coal prices upgraded with WHC's recent June Q production report) and NHC. The outlook is positive for both thermal and met coal benchmark prices on ex-China demand strength and supply issues. All three coal names are trading at a discount to NAV, and earnings and FCF growth are very compelling in CY21/FY22 (c. 20% FCF yields) on our new coal price forecasts.

WHC (Buy, A$2.6/sh TP, 22% TSR) We retain our Buy rating due to:

• 1. Valuation: The stock is trading at c. 0.7x NAV (A$2.78/sh). WHC is currently pricing in long run thermal coal price of US$63/t at 70c AUDUSD, versus our long run price assumption of US$72/t for NEWC 6000kcal (FOB) and spot at c. US$145/t.
  2. Compelling FCF: The stock is trading on a FCF yield of 34% for FY22 on our base case and c. 73% at spot.
  3. Rapid de-gearing: we expect net debt to more than halve to just c. A$0.3bn by end of Dec, and we also expect management to announce more conservative balance sheet targets in August (current target is through the cycle leverage of 0.5-1.5x) and focus on de-gearing, reinstating a dividend in Feb 2022, and developing growth projects with our preference for brownfields and/or value accretive bolt-ons over greenfields.