Daiwa downgrades Yanzhou Coal to "sell", from "underperform"

Daiwa downgrades Yanzhou Coal to "sell", from "underperform" Update datetime: 2008-12-12 9:32:20

Daiwa newly downgraded its rating on H-share of Yanzhou Coal Mining Co., Ltd  from "underperform" to "sell" with target price adjusted down from 7.98 HK dollars to 2.99 HK dollars on ground of deteriorating fundamentals.

Considering the sharp decline of coal demand in steel and power industries, the prices for spot hot coal and coking coal are expected to fall by 25 percent and 50 percent on year in 2009, the broker predicted.

Besides, large proportion of coking coal output and high spot coal price will result in narrow space for output expansion of Yanzhou Coal, it noted. Meanwhile, the resource tax reform will bring high risks to profit making, which are all believed to lead to the underperformance of the stock.

Yanzhou Coal has a coking coal proportion as high as 34 percent.