Coal is still a reliable, inexpensive, and sustainable energy source, especially in developing nations with limited access to alternative energy sources. Advances in clean coal technologies have lowered the environmental effect, making it a more sustainable option.
So, investors should check out fundamentally strong coal stocks, China Shenhua Energy Company Limited (CSUAY), SunCoke Energy, Inc. (SXC) and China Coal Energy Company Limited (CCOZY).
Before delving deeper into their fundamentals, let’s discuss what’s happening in the coal industry.
The coal market covers coal mining industries that use underground mining, strip mining, culm bank mining, and other surface mining methods. The coal mining industry also develops coal mine sites and enhances coal through cleaning, washing, screening, and sizing processes. The coal market is expected to grow to $2.10 trillion by 2031 at a CAGR of 4.4%.
Coal usage is connected to economic growth since urbanization and industrialization drive up demand. Clean coal technologies, such as CCS, could improve environmental performance in coal-fired power plants.
Also, the metallurgical coal market is expected to increase at a CAGR of 2.9% to $17.03 billion by 2028. This growth can be attributed to the rising demand for steel production in various industries such as construction, automotive, and manufacturing. Additionally, the increasing infrastructure development projects across the globe are further driving the demand for metallurgical coal.
In light of these encouraging trends, let’s look at the fundamentals of the three Coal stocks, beginning with number 3.
Stock #3: China Shenhua Energy Company Limited (CSUAY)
CSUAY, headquartered in Beijing, China, is involved in manufacturing and selling coal and power, as well as railway, port, and sea transportation and coal-to-olefins enterprises. It operates through six segments: Coal; Power Generation; Railway; Port; Shipping; and Coal Chemical.
CSUAY’s trailing-12-month net income margin of 18.07% is 44.4% higher than the industry average of 12.51%. Its 11.68% trailing-12-month levered FCF margin is 103.3% higher than the 5.74% industry average.
During the nine months ended September 30, 2023, CSUAY’s revenue from goods and services marginally increased year-over-year to RMB 252.47 billion ($35.48 billion). Its profit for the period stood at RMB 61.09 billion ($8.58 billion), while earnings per share registered at RMB 2.64.
As of September 30, 2023, the company’s total current liabilities amounted to RMB 94.43 billion ($13.27 billion), down from RMB 98.40 billion ($13.83 billion) as of December 31, 2022.
Street expects CSUAY’s revenue to come in at $48.41 billion for the year ending December 2024. CSUAY’s shares have gained 32.8% over past six months to close the last trading session at $15.34. The stock is currently trading above its 50-day and 200-day moving averages of $13.79 and $12.82, respectively, indicating an uptrend.
CSUAY’s POWR Ratings reflect this promising outlook. It has an overall rating of A, equating to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CSUAY has an A grade for Momentum and a B for Stability and Quality. Within the A-rated Coal industry, it is ranked #3 out of 13 stocks. To see additional POWR Ratings for Growth, Value and Sentiment for CSUAY, click here.
Stock#2: SunCoke Energy, Inc. (SXC)
SXC is an autonomous Coke producer. It delivers metallurgical and thermal coal, extending its expertise to furnish adept handling and mixing services to a diverse clientele. The company operates through three segments: Domestic Coke; Brazil Coke; and Logistics.
SXC’s trailing-12-month ROCE of 9.58% is 31.8% higher than the industry average of 7.27%. Its trailing-12-month ROTC of 6.80% is 24% higher than the industry average of 5.48%.
For the fourth quarter that ended December 31, 2023, SXC’s revenues marginally increased year-over-year to $520.60 million. Its adjusted EBITDA grew 5.8% from the year-ago value to $62.30 million. Also, its net income for the quarter stood at $13.80 million, reflecting a 16.9% increase year-over-year. Moreover, its EPS was $0.16, up 14.3% from the prior-year quarter.
Analysts expect SXC’s revenue to come in at $1.73 billion for the year ending December 2024. Its EPS is expected to grow 25.7% year-over-year to $0.86 for the same period. It surpassed EPS estimates in three of four trailing quarters.
The stock has gained 42.9% over the past nine months to close the last trading session at $11.02. The stock is currently trading above its 50-day and 200-day moving averages of $10.27 and $9.06, respectively, indicating an uptrend.
It’s no surprise that SXC has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade for Momentum and a B for Value and Sentiment. It is ranked #2 in the same industry.
Beyond what is stated above, we’ve also rated SXC for Growth, Stability and Quality. Get all SXC ratings here.
Stock #1: China Coal Energy Company Limited (CCOZY)
Based in Beijing, the People's Republic of China, CCOZY primarily engages in the coal production and trading and coal chemical businesses in the People's Republic of China and internationally.
CCOZY’s trailing-12-month levered FCF margin of 8.22% is 43.17% higher than the 5.74% industry average. Its trailing-12-month asset turnover ratio of 0.58x is 6.6% higher than the 0.55x industry average.
During the third quarter ended, CCOZY’s operational revenue came in at RMB 46.85 billion ($6.58 billion). Its net profit for the period stood at RMB 4.85 billion ($681.93 million), while earnings per share registered at RMB 0.37.
CCOZY’s current assets came in at RMB127.34 billion ($17.89 billion) for the period that ended June 30, 2023, compared to RMB123.91 million ($17.41 billion) for the period that ended December 31, 2022.
Also, its total assets came in at RMB346.55 billion ($48.70 billion), compared to RMB339.73 billion ($47.74 billion) for the same period the prior year.
The consensus revenue estimate of $29.42 billion for the year ending December 2024 reflects a marginal increase year-over-year. The stock has gained 28.7% over past year to close the last trading session at $21.42. The stock is currently trading above its 50-day and 200-day moving averages of $16.36 and $5.31, respectively, indicating an uptrend.
CCOZY has an overall A rating, equating to a Strong Buy in our POWR Ratings system.
CCOZY’s is ranked first in the same industry. It has an A grade for Value and Momentum and a B for Growth and Stability. To see additional CCOZY’s ratings for Sentiment and Quality, click here.
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CSUAY shares were trading at $15.25 per share on Thursday afternoon, down $0.33 (-2.09%). Year-to-date, CSUAY has gained 11.48%, versus a 4.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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