Whitehaven hits four-year high on back of surging prices

On the back of coal trades at near record levels, Whitehaven Coal (ASX: WHC) surged 7.24% today to a four-year high of $5.78, and rivals New Hope (ASX: NHC) and Coronado Global Resources (ASX: CRN) also received similar treatment, up 6.5% and 3.7% respectively.

Over one year Whitehaven, New Hope and Coronado share prices are up 191.92%, 134.32 and 82.42% respectively.

Newcastle coal futures traded on the ICE exchange reached US$432 a tonne, just shy of a record $US435 a tonne in early March.

Much of the wave of surging prices for the commodity is being attributed to Europe looking to compensate for a looming shortfall this northern hemisphere winter if it turns off Russian gas.

Stronger for longer

Brokers don’t see coal prices abating any time soon.

Yesterday Credit Suisse updated its coal sector coverage and lifted its Newcastle coal price 35% to US$364 a tonne but retains its price forecasts for FY23 and FY24. 

With increasingly tight markets expected to keep prices elevated for longer, Morgan Stanley recently (23/06/22) raised its coal price forecasts for 2022 and 2023 by 28% and 50%.

Whitehaven is a favoured sector pick

With demand for high grade Australian thermal coal expected to remain high, amid the ongoing energy crisis and tight supply, Whitehaven remains Credit Suisse’s top sector pick, and retains an Outperform rating and target price of $7.30.

Whitehaven is also the preferred exposure within Morgan Stanley’s coverage, with the broker retaining an Overweight rating.

Due in part to the company’s relative growth prospects within the sector, Morgan Stanley’s target price increases to $7.75 from $5.60.

Based on strong free cash flow (FCF), high production and earnings growth, and with the stock trading 15% below NAV ($6.00), Whitehaven is also one of the favoured mining companies within Goldman Sachs coverage.

Goldman’s retains a Buy rating and target price of $6.00, and like rival Coronado (Buy, and price target of $2.50) believes Whitehaven is pricing in below the broker’s long run thermal coal price of around US$60/t (real) versus spot at US$415/t, and long run thermal coal price of US$75 (real $).

Consensus on Whitehaven is Strong Buy.

Based on the six brokers covering Whitehaven (as reported on by FN Arena) the stock is currently trading with 9.9% upside to the target price of $6.35.

Whitehaven coal price over one year.