Coal price likely to gain alongside the surging gas price; Buying opportunity on Yancoal

Coal price likelytogainalongsidethe surginggas price; Buying opportunity on Yancoal Target PriceHK$38.00Up/Downside4.7%Current PriceHK$36.30 Near-term catalyst.The shutdown of the Strait of Hormuz and disruption ofnaturalgas production in the Middle East has pushed the gas price(TTF 1-mthforward)up70%over the past week.The shortage andsurgingpriceof gaswillpossibly drive a switching from gas to coalwhich is subject to less disruption.Historically, seaborne thermal coal price moved in tandem with the Europeangas price (chart below) with a clear positive correlation of 0.86 over the pastdecade.We believeYancoal is set to become a near-term beneficiary given itshigh portion of sales coming from thermal coal (84% in 2025).We estimateevery 1% increase in thermal coal price will boost Yancoal’s earnings by 5%.MaintainBUYwithNPV-based TPof HK$38.Our current earnings forecast andTP has yet to price in the potentially higher coal price resulting from the Irancrisis. China EnergyWayne FUNG, CFA(852) 3900 0826waynefung@cmbi.com.hk Stock Data Source: Bloomberg, CMBIGM Key risks:(1) decline in coal price; (2)elevatedinputcost; (3) extreme weatherthat affects production and delivery. Related Reports 1.YancoalAustralia–2025 profit belowconsensus;resilient coal price tosupport 2026 earnings–26 Feb 2026(link)2.YancoalAustralia–Productionvolumein3Q25affectedbyunfavourable weather–21 Oct2025(link)3.YancoalAustralia–Weak earningsbut largely anticipated; Expect animprovement trend of coal price–20 Aug 2025 (link) Source:Wind, CMBIGM Source:Wind, CMBIGM Source: Companydata,Argus/McCloskey, GlobalCOAL, CMBIGM Source: Companydata,Argus/McCloskey, GlobalCOAL,CMBIGM Source:Company data,Argus/McCloskey, GlobalCOAL,CMBIGM Source:Company data, CMBIGM estimates Valuation We value YAL by net present value (NPV), calculated by the future cash flow of all thereserves based on their effective mine life.We maintainourBUYratingwithTP ofHK$38. Key assumptions:Long-term thermaland metallurgical coal price (startingfrom2029E) of A$140/t and A$200/trespectively.Long-term unit cash costinflation of 1% p.a.WACC of7.2%:Risk-free rate of4.5%,based on 10-yearAustralian governmentbond yield;risk premium of6%, 0.5x beta,and10% debt/capital ratio.AUD/HKD rate ofHK$5.5. Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, in whole or inpart, certifies that with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The HongKong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to thedate of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report3 business days after the date of issue of this report; (3) serve as an officer of any of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies coveredin this report. CMBIGM RatingsBUY : Stock with potential return of over 15% over next 12 monthsHOLD: Stock with potential return of +15% to-10% over next 12 monthsSELL: Stock with potential loss of over 10% over next 12 monthsNOT RATED: Stock is not rated byCMBIGM :Industry expected to outperform the relevant broad market benchmark over next 12 months:Industry expected to perform in-line with the relevant broad market benchmark over next 12 months:Industry expected to underperform the relevant broad market benchmark over next 12 months CMB InternationalGlobal MarketsLimited Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong, Tel: (852) 3900 0888 Fax: (852)3900 0800CMB InternationalGlobal MarketsLimited (“CMBIGM”) is a wholly owned subsidiary of CMB International Capital Corporation Limited (a wholly ownedsubsidiary of China Merchants Bank) Important DisclosuresThere are risks involved in transacting in any securities. The information contained in this report may not be suitable forthe purposes of all investors.CMBIGM does not provide individually tailored investment advice. This report has been prepared without regard to the individual investment objectives, financial positionor special requirements. Past performance has no indication of future performance, and actual events may differ materially from that which is contained in thereport.The value of, and returns from, any investments are uncertain and are not guaranteed and may fluctuate as a result of their dependence on theperformance of underlying assets or other variable market factors.