煤炭行业是否重新陷入衰退

1、Did coal reset for recession?The best coal stocks are at the worst multiplesweve seen. We downgrade ratings on ARLP and BTU to Neutral.North America Equity Research19 August 2019We face a dilemma with the coal equities. Recession worries have further depressedseaborne coal prices; the implied barrie

2、rs to entry promise a brighter future to miners that are ready to service the likely growth in demand the developing world as manufacturing moves China to places like Vietnam. Coal stock prices have fallen well below our and the price targets based on long-term though Archs and Peabodys share prices

3、 can be explained if we value them based on the current (we believe unsustainable) seaborne coal price levels. Should a recession hold down coal prices and volumes through to the end of 2020 (the date of our price targets), our forecast attractive EV/EBITDA multiples be incorrect. rising risk recess

4、ion has led us to our ratings on Alliance and to Neutral as we better entry points could develop. Yet we dont we add value by lowering our price targets to levels implied by the current (recessionary?) coal price levels. So were leaving our price targets elevated to highlight the potential of the co

5、al stocks to deliver a tobacco-like recovery on the basis that the sectors products are unpopular are still needed. Given economists tendency to see recessions through the rearview mirror, perhaps the right strategy is to wait for the recession to be officially announced and then buy the coal sector

6、 to benefit the inevitable economicstimulus.What will China do? JPMs Po Wei sees more Chinese coal mine capacity returning after safety checks and some new capacity coming on line even as industrial activity is muted. The risk of the country reaching its hard limit on imports in Q419 seems to be gro

7、wing as evidenced by the steady fall in prices for the API5 product.Will miners respond with production cuts and extended holidays? Glencore has reacted to oversupply in the past giving its workforce an extended year-end holiday to reduce supply, and could happen again. Other miners might Glencores

8、example and the coal in the ground awaiting a friendly market.LNG remains oversupplied and seems to be pressing on seaborne coal prices as by the strong correlation between the two fuels. In a recent discussion J.P. Morgans Po Wei reported that could remain well supplied into 2020. But we dont belie

9、ve this higher cost, higher quality fuel can satisfy the needs of the developing world with its new fleet of coal plants under construction. Consequently, we feel that once the current glut of LNG is cleared, profitability will return for the coal miners, helped in part by the implicit barriers to e

10、ntry put in place by the pressures on miners not to build new coalmines.Equity Ratings and Price TargetsPrecious Metals & CoalJohn Bridges, CFA, ACSM AC(1-212) 622-6430 HYPERLINK mailto:john.bridges john.bridgesBloomberg JPMA BRIDGES J.P. Morgan Securities LLCSiddharth Mishra(91-22) 6157-3018 HYPERL

11、INK mailto:siddharth.mishra siddharth.mishraJ.P. Morgan India PrivateLimitedCompanyTickerMkt Cap ($ mn)Price ($) Rati Curng PrevCur Price TargetEndDateEnd DateAlliance Resource PartnersARLP US1,914.9714.96NOW22.00Dec-2023.00n/cArch Coal, Inc.ARCH US1,310.4676.82Nn/c106.00Dec-20107.00n/cPeabody Energ

12、yBTU US1,958.2819.18NOW30.00Dec-2035.00n/cSource: Company data, Bloomberg, J.P. Morgan estimates. n/c = no change. All prices as of 16 Aug 19.See page 17 for analyst certification and important disclosures, including non-US analyst disclosures.J.P. Morgan does and seeks to do business with companies

13、 covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. HYPERLINK / 24082002207200200620

14、0180520016042001403200120220010012008020060Figure 2: Tech versus Commodities240820022072002006200180520016042001403200120220010012008020060NASDAQCompositeIndex(LHS)BBG Commodity Index(RHS)Source: Bloomberg.As a proxy for the hard commodity space weve taken significant coal producer Glencore (covered

15、 by JPMs Dominic OKane). The stock chart below shows the strong recovery after the commodity sector balanced in early 2016 but is now slipping, and Dominic recently downgraded GLEN to Underweight.Figure 3: Commodity equities; Glencore for exampleGlencore share price400Glencore share price35030025020

16、0150100Jan-14Apr-14 Jan-14Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19Jul-19Source: Bloomberg.Commodity valuationTypically investors are more interested in the smaller cyclical moves. But as we thin

17、k about recession risk we decided to look at the cycle. Its been said before that in commodity investing you should be buying when stocks are trading at high EV/EBITDA multiples and sell when they get to low single digits. Whats intriguing here is that the stock is trading at low-single-digits EV/EB

18、ITDA, yet JPM has just downgraded the stock.Figure 4: Valuation triggersSource: Bloomberg.ConclusionGiven the developing worlds need for affordable power to begin creating wealth for entry-level manufacturing and the constraints on coal mine supply, we see longer term opportunity in coal. We feel th

19、e target prices for Alliance, Arch, and Peabody which are 49%, 37% and 56% ahead of current trading, highlight the potential.Our concern is more about timing. The twinand somewhat relatedrisks of new cuts to Chinas coal imports and recession could cause further weakness in the coal stocks before cyc

20、lical stocks like coal recover later in 2020.Consequently, were reducing our rating on Alliance Resources and Peabody from Overweight to Neutral, fearing that the weak momentum in these stocks could continue into 2020 and offer better entry points for investors. Perhaps the right trade will be to bu

21、y the coal equities on the news that we are in recession!In more detailMet coal prices had been holding up remarkably well since the recovery from the post-China-boom lows in late 2015 / early 2016. The Street believes the inducement price for new met coal capacity is between $140/t and $160/t. Henc

22、e, the average met coal price $200/t over the last three years has surprised.Contura, on its call, blamed Australia for the recent met coal price weakness. After the quiet cyclone season Australia was able to catch up with deliveries ahead of June year-ends. However, the reduced activity in the glob

23、al steel sector and some pushback from China on imports probably played a part in reduced prices for Conturas coking coal.Figure 5: Met coal205195185175165155145135125Jan-17 Feb-17 Mar-17 Apr-17Jan-17 Feb-17 Mar-17 Apr-17Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 Ju

24、n-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19Feb-19 Mar-19 Apr-19 Jun-19 Jul-19 Aug-19SGX Australia Coking Coal 1M FuturesSource: Singapore exchange.Seaborne thermal coal prices have been under pressure since mid 2018, likely impacted by growing supplies of LNG. JPMs Mark Busuttil points to

25、a buildup of gas in storage, and other sources mention LNG carriers are slow steaming, adding a little bit more storage in the system.Figure 6: Thermal coal pricesSource: Bloomberg.API2 Coal ($/t)Newcastle Coal (6,000 kcal, $/t)Newcastle Coal (5,500 kcal, $/t)Alliances Joe Craft mentioned on his con

26、ference call recently that he was seeing the most discussions about deals ever. This seems to have been kick-started by the Arch/Peabody plan to combine their PRB and Coloradan assets. A combination of this scale that puts about two-thirds of PRB production capacity under one management group would

27、have been unthinkable just a few years ago.The parties decision to propose the combination and the slow response from the FTC probably highlights a realization that something has to be done.For the miners facing falling sales of PRB coal, its important to protect economies of scale. Cloud Peaks and

28、Blackjewels bankruptcies highlight the risk that diversified miners might be cross-subsidizing PRB operations frommore profitable mineselsewhere.While utility demand for PRB coal is slipping, it remains about half of US supply by tonnage. Should major miners like Arch and Peabody decide to just harv

29、est their investment in the PRB region, utilities could become very concerned about the reliability of coalsupply.US utilities have been in situations before where oil- and gas-based generation had to be replaced with coal. Oil capacity was made uneconomic due to OPECs quadrupling of the oil price i

30、n the 1970s. Then in the early 2000s (before shale gas) utilities had invested in GE combined cycle gas plants, but then natural gas supplies disappointed, and in both cases power generators had to fall back on coal power.While the combination of finance, fracking, and good geology has delivered abu

31、ndant nat gas, the buildout of LNG export capacity couldin theorynetback seaborne LNG prices to the US markets. US utilities probably dont want to be paying the US domestic equivalent for domestic gas during coal winters.JPMs Po Wei has a negative near-term outlook for Chinese thermal coal due incre

32、ased supply in 2H19 vs. 1H19Po believes Chinas coal supply has largely normalized after a major mining accident in 1Q19. Coal production for July 2019 grew by 12.2% YoY to 322.23 mn tons compared to just 4.3% growth YTD. Meanwhile, overall electricity generation remains weak in July (+0.6% YoY). Hyd

33、ropower generation in July continued to be strong at 6.3% YoY while thermal power generation growth turned negative at -1.6% YoY. Po thinks that with notably faster growth in coal supply, high coal inventory at major IPPs and continuous displacement of thermal power by hydro, coal price lacks short-

34、term upside catalysts. Also, from a seasonality standpoint, September and October coal demand have historically fallen 11% and 8% MoM, respectively. JPM therefore expects thermal coal prices to fall in the coming months.China import policy likely to get incrementally tighter . . .Coal imports accele

35、rated in July, up 13% YoY and 21% MoM to 33 MT, but should slow going forward as coal production normalizes in China. Po believes import activity accelerated in the recent month as IPPs daily coal consumption surged in peak demand season, but with another low demand season looming in Sep-Nov and hea

36、lthy inventories (25 days), JPM believes measures to restrict total imports in 2019 to 2018 levels may only become stricter in coming months with some Chinese ports already starting to tighten imports under their oversight (source: IHS Energy, Sxcoal). The NDRCs target of not importing more coal tha

37、n 2018 (281MT) implies only 126MT headroom for 2H19 or 21MT monthly imports in Jul-Dec (including coking coal). This compares to 25-26MT average monthly coal imports in 1H19 and 22-23MT average in 2H18 (dragged down by restrictions from mid Nov 2018).Arch CoalArchs exit from the Chapter 11 process w

38、as finalized earlier than Peabodys and before the met coal price began to recover; consequently, it exited with minimal net debt, so it has been a very aggressive distributer of surplus cash in buybacks and dividends.The downward re-rating in Q418 seems to correlate with falling interest rates and m

39、ay reflect a concern that a recession could end the supernormal profits it had been reporting.Figure 7: Valuation steps lower againSource: Bloomberg.The proposed JV of its PRB and Colorado mine assets with Peabody should allow it to focus on its met coal business. And already the company has begun w

40、ork on expanding its capacity to produce Hi vol A coal from its Leer south projectPeabody EnergyPeabody has traditionally traded on higher multiples than Arch, and we felt we were beginning to see this premium returning in H118. However, the mine fire at North Goonyella undermined confidence. The lo

41、ng reentry period is now being reviewed as the local regulators have proved more cautious than expected.The new plan is to do a comparison of continuing with the plan to reenter the fire- affected parts of the mine with developing a new mine section south of the fire- affected part of the mineFigure

42、 8: Peabody has followed the same pattern at ArchSource: Bloomberg.Alliance ResourcesARLPs more limited exposure to the seaborne market may explain its relatively strong multiple as may its MLP structure. The company has positioned to be a bigger coal exporteras domestic utilities take less of its p

43、roduct and the company is increasing its exposure to the E&P sector.We feel the companys low production costs and transportation choices to get coal to water on the Gulf mean it is well positioned to export higher BTU coal, which is becoming harder to find in the seaborne market. The company is stan

44、ding back from the weak export market in 2020 and waiting for better circumstances to lock in prices.The company also notes that given its mix of long wall and continuous miner operations it is well placed to fine tune its production profile to whatever seaborne demand it finds for its coal. Other m

45、ining companies with just long wall operations can find it more difficult to match mine supply with profitable contracts.Figure 9: Lower seaborne exposure (and its MLP structure) may be helping hereSource: Bloomberg.Alliance Resource PartnersNeutralCompanyData52-week range ($)20.99-14.41Adj. EBITDA

46、($ mn)62964852-week range ($)20.99-14.41Adj. EBITDA ($ mn)629648673670675585559517Market cap ($ mn)1,914.97EBITDA growth(9.2%)3.1%3.9%3.3%0.2% (12.6%) (17.2%) (11.6%)Exchange rate1.00EV/LPs EBITDA6.36.7Free float(%)67.3%Grossed-up EV/EBITDA5.06.73M - Avg daily vol (mn)0.47Debt/EBITDA0.81.01.01.01.03

47、M - Avg daily val ($8.1DCF/LP unit ($)72.653.012.432.171.93mn)Price/LPs DCF5.65.0Volatility (90 Day)25Distribution per unit ($)1.952.06IndexRUSSELLDistribution coverage1.00.92000Distribution yield13.6%14.2%14.4%14.4%14.4%14.4%14.4%14.4%Alliance Resource Partners, L.P.(ARLP;ARLPUS) Year-endDec($)FY17

48、A FY18AFY19E (Prev)FY19E(Curr)FY20E(Prev)FY20E(Curr)FY21E(Prev)FY21E(Curr)BBGBUY|HOLD|SELLSource: Company data, Bloomberg, J.P. Morgan estimates.Investment Thesis, Valuation and RisksAlliance Resource Partners, L.P. (Neutral; Price Target: $22.00)Investment ThesisWe believe ARLP stands out among coa

49、l companies due to its strong asset base and well-managed balance sheet. The ILB region has higher BTU coal and has more transport (rail and barge) choices compared with western coal basins. We expect ILB coal will continue to take market share from other basins such as CAPP as scrubbed generating c

50、apacity grows. ILB coal should benefit under carbon emissionsrulesas a high-energy coal that emits relatively little carbon for a given amount of useful energy. We feel ARLP is a defensive name in a sector that continues to fight cost shale plus it is increasing its investments in the minerals segme

51、nt (mainly oil and gas) as a hedge against lower coal prices. While we continue to like the coal equities we feel it could be difficult for the sector to outperform while a recession is indicated by the inverted yield curve; consequently, weve reduced our rating from Overweight toNeutral.ValuationWe

52、 are reducing our December 2020 price target to $22 ($1 lower than our previous price target of $23) on a discounted cash flow methodology. We forecast DCF/LP units for five years past 2019 and calculate terminal value using a 0% terminal growth rate (due to the declining nature of the asset base).

53、Cash flows are discounted at a required rate of return of 9.5%, which we believe reflects the inherent risk involved in coal mining in addition to the regulatory uncertainty faced by the industry. Our price target implies a yield of roughly 9.8%.Risks to Rating and Price TargetRisks to the upside in

54、clude: (1) Closure of excess gas supplies from troubled US E&P companies leading to more US coal demand; (2) a US-China trade agreement that stabilizes the global economy and gives confidence to the seaborne coal market allowing ARLP to contract sales for 2020 at higher levels; (3) cost-cutting rati

55、onalization in the US coal market that improves coals position relative to gas.Downside risks include: (1) Increased regulatory scrutiny and emissions uncertainty: the regulatory landscape remains a key risk in the coal space, in our view interestingly, ILB coal initially benefited from environmenta

56、l rules as utilities installed SO2 and NOX scrubbers and used more ILB coal but now the focus is on carbon emissions; (2) continued weak gas prices; (3) customer concentration: almost 30% of ARLPs revenues are derived from two key customers, the Tennessee Valley Authority and Louisville Gas and Elec

57、tric Company ARLP could be forced to shut down mines and cut distributions should these key customers cancel or fail to renew coal contracts or if low coal prices restrict the companys ability to replace its better priced contracts.Alliance Resource Partners: Summary of FinancialsIncome Statement-An

58、nualFY18AFY19EFY20EFY21E Income Statement-Quarterly1Q19A 2Q19A 3Q19E 4Q19ERevenues2,0032,1081,9811,906 Revenues527A517A545519Cost of products sold(ex.D&A)- Cost of products sold(ex.D&A)-D&A(280)(311)(294)(306) D&A(71)A(77)A(83)(80)SG&A(68)(75)(69)(67) SG&A(18)A(20)A(19)(18)Other income/(expense)3522

59、21 Other income/(expense)20A1A11Adj.EBITDA648670585517 Adj.EBITDA189A146A175160Interestexpense(40)(48)(52)(52) Interestexpense(11)A(11)A(13)(13)Incometaxprovision(1)(8)00 Incometaxprovision(7)A(0)A(0)Netincome367480238159 Netincome276A58A7867Total non-recurring items, netoftax- Total non-recurring i

60、tems, netoftax-Netincome(recurring)327310238159 Netincome(recurring)106A58A7867Diluted unitsoutstanding(millions)131128127127 Diluted unitsoutstanding(millions)128A128A128128EPS2.743.691.831.21 EPS2.12A0.44A0.600.52Adj.EPS2.442.361.831.21 Adj.EPS0.80A0.44A0.600.52Distributable Cash Flow-AnnualFY18AF