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Reawakening of Coal

Coal companies share price recently experienced a surge with significant transaction volume. Evenmore, PTBA's share price gapped up at market opening on March 5th, broke through its closest resistance of its previous high at IDR2,710. ADRO and ITMG also showed a strong rally the past few days, indicating rising interest from investors towards the sector.

Share Price Performance Comparison from February 26th to March 5th 2024

Source : Stockbit

The rally of coal companies share price was mainly fueled up by the hike of ICE Newcastle coal price to USD136/ton. We see that there are two factors that drove up the index. First, the decline of Russian coal export to China under economic sanctions and logistic issues, disrupting an estimate of 30mn ton of supply. Secondly, coal price was also triggered by the rebound of natural gas price which may have bottomed.

Coal (white) and natural gas (blue) price comparison

Source : Bloomberg

These sentiments can help to boost coal companies share price to go higher as investors forward looking and try to project how far will it impacts earnings. For most major coal companies, the current cash cost for coal categorized at ICI 3 ranges between USD25 - 30 per ton, which is still very lucrative for the business.

That being said, coal fundamental is still weakening. Russian coal exports which is under threat of disruption is actually not sizeable enough compared to global seaborn imports of 970mn tons. Moreover, Russian players are likely to dump their coal to China during sanction periods as exhibited by Russian coal export to China that surged 44% to 104 mn tons in 2023. Meanwhile, the stagnant import demand from China and India could also put pressure on coal price going forward.

Coal Consumption in MT.

FY21 (light blue) - FY22 (dark blue) - FY23F (green)

Source :

Therefore, we suggest to pay more attention to coal contractors as the cash cost remain lucrative which made the outlook of coal production to remain stable. UNTR might be one of the good example to be included in to the watchlist.

We see that currently UNTR has an undemanding valuation which currently trades at 4.4x and 1.1x PE and PBV, respectively. Thanks to the recent decline on its share price which we believe was overpunished.

UNTR Valuation

UNTR Forward PE Band

Source : Sucor Sekuritas Research

On the side note, our channel check indicates that there's a good probability that the heavy equipment sales may came in better than consesnsus expectation. And the cherry on top for UNTR, is the possible acquisition which currently involves the due dilligence of two companies that might be announced in the near future.


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