Basic Resources: At an inflection point?
We re-initiate coverage of the Polish coal sector with a mixed view on the companies’ prospects: we have a BUY on JSW and a NEUTRAL on Bogdanka. In our view the mid-term outlook for met-coal will stay rosier on accelerating global economic growth, along with robust steel consumption and a favourable BF-EAF spread. Next to advantageous HCC prices we put on an equal footing possible consensus underestimation of JSW's plans to change its product mix towards coking coal. We believe that in accordance with the 2016-2025 strategy its new version to be revealed any day now will confirm its 2019 coking coal production target of around 14Mt (85% of total output) compared to 10.7Mt (72% of total production) today, with the additional capacity breakdown split almost evenly between HCC and Semi-Soft grades. On top of that, we forecast JSW and benchmark prices' spread to narrow on soaring freight rates which in turn translate into a strengthening position for JSW in netback pricing negotiations with local off-takers. As for Bogdanka while we really value its cost-effective business model, its current supply arrangements hamper its ability to charge off-takers with the market price which leads us to have a more cautious stance on the performance of its shares. We see hardly any triggers, especially in the coming quarters, when we believe high comps will not allow the company to exceed market expectations.Jastrzebska Spolka Weglowa is a producer of type 35 coking coal (“orthocoking coal” according to Polish Standard). The main line of Co.'s business is also the mining and sales of steam coal. Co. is also central for selling all coal derivative products, i.e. coke and hydrocarbons produced by coking plants owned by the JSW S.A. Capital Group. The mining area is located in the Upper Silesian Coal Basin. The principal clients for Co.'s products are located primarily in Poland, Germany, Austria, the Czech Republic, Slovakia, and also India and Brazil.
Lubelski Wegiel Bogdanka is a hard coal manufacturing group based in Poland. Co.'s core business activities are mining and agglomeration of hard coal. The energetic coal sold by Co. is used mainly for the generation of electric and thermal energy as well as for cement production. Co.'s customers are mainly the industrial companies, first of all those acting in the power industry and situated in east and northern - east Poland. Co.'s mine is located in the part of Lubelskie Coal Basin (LZW) and performs its mining operations within the mining area with surface of 57 km2.
Haitong is the first international Chinese investment bank and our goal is to be the primary channel for capital flows into and out of China. During 2015 the Senior Management Team in London was expanded significantly to focus on this objective and to provide a full-service cross-asset markets business coupled with sector-focused investment banking. We work closely with our world-wide network of offices to bring a true depth of understanding to all client situations.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.