Credit Suisse expects a -25% fall in Newcastle coal prices to be sustained. In terms of electricity, the broker believes interventionist federal policy will mean a return to oversupply beyond 2022 and, thus, a return to coal cost as the price setter.
The broker believes the stock’s value is exposed to lower coal prices, estimating the value sensitivity to a US$10/t change in the export coal price is 8.5%. The broker maintains an Underperform rating and reduces the target to $18.10 from $18.30.
Target price is $18.10.Current Price is $22.37. Difference: ($4.27) – (brackets indicate current price is over target). If AGL meets the Credit Suisse target it will return approximately -24% (excluding dividends, fees and charges – negative figures indicate an expected loss).