Will New Hope make money?, page-114

Goldman Sachs just upgraded their price target to 2.10 with a buy rating.

Thermal and Metallurgical Coal NHC (Buy, A$2.1/sh TP)

• We reflect our revised thermal coal price forecasts which result in a 7%/38%/20% increase in our FY21-23 EPS. We increase our NAV by 10% to A$2.15/sh and our TP also by 10% to A$2.1/sh (from A$1.9/sh), unchanged EV/EBITDA target multiple of 6x.

We retain our Buy rating on:

• Low cost: Bengalla is one of the lowest cost thermal coal operations in Australia, and we continue to see impressive cost performance despite wider industry inflation. NHC produces an impressive FY21/22 FCF yield of 23%/13% on our base case (at US$86/t/US$75/t thermal coal price).
• Undervalued on a DCF basis even when removing New Acland: The stock is trading at 0.63x NAV (A$2.15/sh) at our long-run thermal of US$67/t (real), and 0.7x NAV (A$1.92/sh) if we exclude New Acland Stage 3.

• Pricing in long run coal price of US$61/t (real$ at 70 AUD) vs our long run of US$67/t and spot at US$95/t.