Yanzhou ++

Coal Stocks Flying; N/T Coal Price To Stay High

Shenhua (1088.HK) +9.3% at HK$51,

Yanzhou Coal (1171.HK) +9.3% at HK$16.86,


China Coal (1898.HK) +5.8% at HK$26.55 despite recent sharp gains, as near-term coal prices tipped to stay high, on expected prolonged tight coal market, high oil price. DBS lifts average domestic/export coal price growth (thermal/coking) assumption to 5% growth for both FY08 and FY09, up from previous 2% and flat growth, respectively. "We believe near-term supply constraint will continue to underscore the spot coal market in 4Q07." Also ups earnings forecast by 5-6% for both Shenhua (1088.HK) and Yanzhou Coal (1171.HK) for FY08-09. Keeps Fully Valued on Shenhua given its current valuation, which 33X PER for 2008, highest among regional peers; keeps Hold on Yanzhou, with 13% upside to target price of HK$17.50.  

Yanzhou Coal (01171) Coal price increased 18% this year. The Group's production in the first half did not meet expectation. However, improvement is expected in the second half. The Group will make up for the shortfall in production. Share price is cheap compared with Shenhua and China Coal. Buy $15.20 Target $17.00 Cut loss $12.00