Yanzhou Coal Mining Co. (YZC) is China's second largest coal mining company, with over 2 billion tonnes in reserves, and has recently expanded into Australia. The stock price of Yanzhou Coal Mining Co. (YZC) has been hit particularly hard over the past 6 months or so, and will in all likelihood continue to fall in the short term. However, I believe that the company has excellent longer term prospects.
China consumes more coal than the United States, Europe and Japan combined and continues to build new coal-fired power stations. While coal is considered to be the dirtiest of all energy sources, the environmental impact is less critical in the immediate future as greener technologies are just not economically viable in China at this time. Obviously this will change in the future, but for now China will continue to burn coal and lots of it.
The company has low debt, has shown excellent growth in recent years, and pays a 3.5% dividend.
Yanzhou Coal Mining Co. (YZC) currently trades at a trailing P/E of 4.2, below book value, and a price of $7.05. I anticipate a 12-month price target of $13 as the economic outlook improves in the second half of the year.
Disclosure: At the time of writing the author did not hold shares in Yanzhou Coal Mining Co. (YZC).
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