Yanzhou coal now trading at 7.9 about a 24% return, but now UBS report give the target price of 10.4. Now is yanzhou coal another COSCO? Does history repeat so quickly now?
1) Coal price is up
It's also a sort of turnaround for the industry. And given yanzhou coal's cost is more than its peers, the increase a goal price should have a greater impact on the bottom line. E.g. two factories both produce coals, one use 80 and another use 60 to produce one unit. When price is 100, profit for two is 20 and 40 respectivly. If price increase to 120, profit for two is 40 and 60, one is an increase of 100% another is an increse of 50%. Therefore yanzhou coal should benefits more from the increase in the coal price than its peers.
2) Fundemental is not that good for yanzhou coal
Yanzhou coal has some production problems recent years, not sure if it's one off issue or not. Although UBS target price is 10.4, it also forcast an decrease in profit of 12% or so.
3)Market attention
Yanzhou coal also has the market attention as COSCO had, the price has increased 3% while market as whole was falling last friday.
Is yanzhou coal another COSCO for me? Everything is so smiliar except that the fundemental for yanzhou coal is not as good as COSCO. However given the market attention and recent performance of the stock price, I tend to believe yanzhou coal is another COSCO for me. Am I right this time? Only time will tell, let's wait for about 2 weeks to one month and see if the yanzhou coal can reach $9.5.
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