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1、Top picks,Buy,Buy,Buy,H o ld,Buy,Deutsche BankMarkets Research,North AmericaUnited StatesIndustrialsMetals&Mining,IndustryNorth American Coal,Date2 October 2012Industry UpdateDavid S Martin,Not pulling trigger on remainingBuys.with coal prices at troughTrimming ests again and sticking with BuysCoal
2、equities have stabilized in past mths but have underperformed and remaindown 43%YTD,and there is little reason to be optimistic on current trends.Also,s-t valuations are challenging.However,we are expecting some change(ie China restocking)and see global QE and seasonal trends as positive in thecomin
3、g months/quarters.Also,thermal&met prices both now appear atsimilar points of the cycle.In total,a recovery will take time but sentiment ispoor,were not inclined to make addl downgrades and we continue to seerelative winners and l-t upside in the sector.Further,our Buys are directed toplayers with s
4、ome distinct advantages and include CNX,BTU&WLT.DB adopts more cautious bulks outlook on China/EU unknowns,but,Research Analyst(+1)212 250-Jorge Beristain,CFAResearch Analyst(+1)203 863-Peabody Energy(BTU.N),USD22.29CONSOL Energy(CNX.N),USD30.05Companies FeaturedArch C o al(AC I.N),U SD 6.3 3,direct
5、ional trends in coal weighted to upside,2012E,2013E,2014E,DB is now forecasting that the benchmark for hard coking coal(HCC)willapproximate$183/mt in 13(-31%to prior)and$200/mt in 14(-13%)vs$210in 12 and current spot at$140-145(down 35%in past 3 months).In the US,EPS(U SD)P/E(x)EV/EB ITD A(x),-0.4 7
6、8.2,-0.3 87.8,0.9 16.95.6,rising US natural gas prices have provided little relief to the outlook(&equities),in the face of lower met&specific-basin issues and our outlook for s-d,Alp h a N atu ral R eso u rces(AN R.N),U SD 6.5 7,balances(global&US)are weaker.However,the commodity price outlook isno
7、w arguably in-sync with both thermal and met trading below costs(peggedat$150/mt HCC by WoodMac),and we believe an improvement in apparentsteel demand in China should aid the met market in the coming months(given,EPS(U SD)P/E(x)EV/EB ITD A(x),2012E-1.6 65.4,2013E-1.9 77.5,2014E-0.6 95.3,likely end o
8、f destocking as key inventories have fallen 30+%in 7 months andfurther stimulus is possible).In the end,recent curtailments,operating costsand some demand improvement should support higher prices and we expectmet/HCC to recover toward$200/mt in the coming quarters.,Peabo dy En ergy(B TU.N),U SD 2 2.
9、2 92012EEPS(U SD)1.6 1P/E(x)1 3.8,2013E1.8 41 2.1,Buy2014E2.7 08.3,Estimates trimmed;maintaining below consensus view,EV/EB ITD A(x),7.3,6.5,5.5,We see some earnings risk in 4Q but our 12 EBITDA ests are trimmed just 4%.,Meanwhile,13 EBITDA ests are reduced 21%,and as a result,our 12-13 EPSestimates
10、 are 3%and 7%below the Street.,C O N SO L En ergy(C N X.N),U SD 3 0.0 52012EEPS(U SD)1.2 9,2013E1.7 5,Buy2014E3.0 1,3Q reporting season to again draw attention to debts/covenants,mineclosures,restructuring charges,capex,recap needs and asset sales,P/E(x)EV/EB ITD A(x),2 3.37.9,1 7.17.4,1 0.06.0,Net
11、debt to 12 EBITDA averages 3.8x in the sector,with a range of 1x for,ARLP to 6x for ACI.However,debt maturity profiles are favorable,liquidity,W alter En ergy(W LT.N),U SD 3 2.4 6,positions are largely adequate and most covenants are fine in the near-term.One exception may be WLT which appears chall
12、enged to meet its covenanttests without w/c gains,capex cuts or cost reductions using our 12-13forecasts.On curtailments,ACI,JRCC&WLT are leading candidates here.,EPS(U SD)P/E(x)EV/EB ITD A(x),2012E1.8 31 7.87.6,2013E1.9 31 6.87.1,2014E4.5 37.25.0,PTs reduced 16%on lower ests(with 22%avg upside);PT
13、multiples pushedhigher given cyclical leverageCoal equities are trading at 7x 12 and(3)WLT given premium HCC assets and costs.Risks includeglobal demand,operating costs,supply,FX rates and coal prices._Deutsche Bank Securities Inc.All prices are those current at the end of the previous trading sessi
14、on unless otherwise indicated.Prices are sourcedfrom local exchanges via Reuters,Bloomberg and other vendors.Data is sourced from Deutsche Bank and subjectcompanies.Deutsche Bank does and seeks to do business with companies covered in its research reports.Thus,investors should be aware that the firm
15、 may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.DISCLOSURES ANDANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1.MICA(P)072/04/2012.,2 October 2012Metals commodity price
16、 forecasts.6Thermal coal outlook.7Coking coal outlook.15Coal seasonality.18Coal costs.19Risks.20Coal company comparisons.21ARLP:Investment Thesis.25ANR:Investment Thesis.29ACI:Investment Thesis.33CNX:Investment Thesis.37JRCC:Investment Thesis.41BTU:Investment Thesis.45WLT:Investment Thesis.49Appendi
17、ces.52NA Coal sector comparative valuation charts.52,Page 2,Deutsche Bank Securities Inc.,2 October 2012Metals&MiningNorth American CoalIndustry updateEquity and commodity price performanceFigure 1:Stock price performance,28-Sep-12Alliance ResourceAlpha Natural ResourcesArch CoalCONSOL EnergyJames R
18、iverPeabody EnergyWalter EnergyS&P 500 Index,1 month-4.3%7.9%1.9%-4.9%-1.0%-0.3%-4.8%2.2%,3 months8.4%-21.4%-2.6%2.5%0.7%-4.2%-28.0%8.4%,6 months-8.0%-55.8%-41.4%-9.8%-43.5%-22.7%-43.9%2.5%,1 year-8.9%-65.3%-58.4%-15.6%-58.0%-37.6%-48.6%25.2%,YTD-20.7%-67.8%-56.4%-18.1%-58.4%-32.7%-46.4%14.6%,3 year
19、s65.1%-81.6%-71.6%-34.3%-85.4%-41.0%-46.0%35.5%,Source:Factset and Deutsche BankFigure 2:Commodity price performance(2Q11-3Q12),28-Sep-12,YTD,YoY,QoQ Current,3Q12,2Q12,1Q12,4Q11,3Q11,2Q11,chg,chg*,chg*,Seaborne steam coal($/tonne)Seaborne met coal($/tonne),-26%-39%,-29%-41%,-9%-22%,87140,86173,95221
20、,112214,116240,120293,120314,Average,-32%,-35%,-15%,Natural gas($/MMBtu)WTI($/bbl),-3%-6%,-26%5%,26%0%,2.993,3.093,2.493,2.5103,3.595,4.089,4.3103,Average,-5%,-11%,13%,CAPP($/ton)IB($/ton)NAPP($/ton)PRB($/ton),-9%-19%-3%-27%,-16%-14%-23%-32%,8%-6%1%10%,65416110,64435110,6046509,64495710,73526614,765
21、06614,76496613,Average,-15%,-21%,3%,Low-vol Met coal,US($/tonne)High-vol Met coal,US($/tonne),-35%-27%,-42%-34%,-15%-15%,141111,161125,190147,211156,244163,276189,290217,Average,-31%,-38%,-15%,US HRC($/tonne)China HRC($/tonne)US shredded scrap($/lt)Iron ore(62%Fe)($/dmt),-7%-14%-13%-24%,-8%-22%-17%-
22、37%,-3%-14%-10%-20%,713595388106,700599379112,723695419141,790698456143,726699435141,761764457177,895765454178,Average,-15%,-21%,-10%,*Calculated based on quarterly average prices;Benchmark used:Steam Coal=Newcastle fob;Met Coal=Australian spot HCC fob;CAPP=Central Appalachia 12,500 Btu,1.2 SO2 Coal
23、;NAPP=Northernppalachia 13,000 Btu,3.0 SO2 Coal;IB=Illinois Basin 11,800 Btu,5.0 SO2 Coal;PRB=Powder River Basin 8,800 Btu,0.8 SO2 CoalSource:Bloomberg,Argus,Inside Coal,CRU and Deutsche Bank,Deutsche Bank Securities Inc.,Page 3,2 October 2012Metals&MiningNorth American CoalKey changes:estimates,pri
24、ce targets and ratingsFigure 3:NA Coal price target and rating summary,Recommenda,Old,Current,12-month,Upside,Old Price,PT/NPV*,Implied,Company,Ticker,tion Recommendation,Price*,Price Target,Target,EV/EBITDA,Alliance ResourcesAlpha NaturalArch CoalCONSOL EnergyJames RiverPeabody EnergyWalter Energy,
25、ARLP.OQANR.NACI.NCNX.NJRCC.OQBTU.NWLT.N,HoldHoldBuyBuyHoldBuyBuy,HoldHoldBuyBuyHoldBuyBuy,59.956.576.3330.052.8822.2932.46,70.007.508.0040.003.0028.0042.50,17%14%26%33%4%26%31%,70.009.7511.0043.003.5032.0060.00,1.0 x0.9x0.9x1.0 x1.0 x1.0 x1.0 x,5.5x7.9x8.3x8.7x9.9x7.6x8.2x,Average,22%,1.0 x,8.0 x,*A
26、t Sep 26th closing prices;*NPV:Net Present Value calculated via Discounted Cash Flow methodology;Source:Deutsche Bank estimates and FactsetFigure 4:DB Coal EBITDA and EPS estimates versus consensus,Current DBe,Previous DBe,Change,Cons.Current,DBe vs Cons.,Cons.-60 days,Cons.change,Company name,2012E
27、,2013E,2012E,2013E,2012E,2013E,2012E,2013E,2012E,2013E,2012E,2013E,2012E,2013E,EBITDA(US$mm),Alliance ResourceAlpha NaturalArch CoalCONSOL EnergyJames RiverPeabody EnergyWalter Energy,5897796551,241691,631551,5985536991,396531,778583,5958006431,300761,700610,6038769201,519732,147879,-1%-3%2%-5%-9%-4
28、%-10%,-1%-37%-24%-8%-27%-17%-34%,6017406691,338711,758572,6496316791,405211,930708,-2%5%-2%-7%-3%-7%-4%,-8%-12%3%-1%152%-8%-18%,5989646581,413762,077685,6539747861,591512,370953,1%-23%2%-5%-7%-15%-16%,-1%-35%-14%-12%-58%-19%-26%,Simple average,-4%,-21%,-3%,16%,-9%,-23%,EPS(US$),Alliance ResourceAlph
29、a NaturalArch CoalCONSOL EnergyJames RiverPeabody EnergyWalter Energy,7.02-1.66-0.471.29-3.261.611.83,7.04-1.97-0.381.75-3.351.841.93,7.19-1.58-0.501.48-3.051.792.60,7.12-0.640.502.16-2.792.815.13,-2%5%-6%-13%7%-10%-30%,-1%nm-176%-19%20%-34%-62%,6.85-1.52-0.461.49-3.231.882.01,7.16-1.77-0.511.62-4.5
30、12.193.51,2%9%3%-14%1%-14%-9%,-2%11%nm8%-26%-16%-45%,6.86-1.07-0.501.74-2.852.533.64,7.28-0.95-0.202.20-3.673.216.40,0%42%-9%-14%13%-26%-45%,-2%nm154%-26%23%-32%-45%,Simple average,-7%,-46%,-3%,-12%,-5%,12%,Source:Factset and Deutsche Bank estimates,Page 4,Deutsche Bank Securities Inc.,2 October 201
31、2Metals&MiningNorth American CoalValuation and debt summaryWe use EV/EBITDA multiples(between 6x and 10 x)and NPVs as our primary valuationtools in the sector.On average,our coal coverage is trading at 7x 13 EBITDA estimatesand 0.8x NPV,and our PTs are predicated on average target EV/EBITDA multiple
32、s of 8x13 EBITDA,which equate to 1.0 x NPV.Figure 5:NA Coal valuation summary,28-Sep-12,Share,Target,Market Enterprise,EV/EBITDA,P/E,(US$)Alliance ResourcesAlpha NaturalArch CoalCONSOL EnergyJames RiverPeabodyWalter Energy,RatingHoldHoldBuyBuyHoldBuyBuy,Price59.956.576.3330.052.8822.2932.46,Price70.
33、007.508.0040.003.0028.0042.50,Cap2,2111,4471,3426,8891006,0142,038,Value2,9094,1835,4179,88552511,9464,166,2012E4.9x5.4x8.3x8.0 x7.6x7.3x7.6x,2013E4.9x7.6x7.7x7.1x9.8x6.7x7.1x,2012E8.5xnmnm23.3xnm13.8x17.8x,2013E8.5xnmnm17.1xnm12.1x16.8x,P/NPV0.9x0.8x0.7x0.8x1.0 x0.8x0.8x,EV/res*3.20.91.02.21.41.311
34、.1,Average,7.0 x,7.3x,15.9x,13.6x,0.8x,3.0,*EV/ton=EV/total reserves;Source:Deutsche Bank estimates and FactsetSource:Deutsche BankFigure 6:Balance sheet and covenant summary,Maturities($m),2Q12($m),Covenants,2012YE compliance Covenants,2012,2013,2014,Cash,Liquidity,Net debt,Interest,Fixed,Lever-,Mi
35、n.Interest,Fixed,Lever-,Min.,cover,cover,age EBITDA,cover,cover,age EBITDA,Alliance ResourcesAlpha NaturalArch Coal*CONSOL EnergyJames RiverPeabodyWalter Energy,186911112-10157,-3-122110,31-3-108130,11252518200165489129,6261,5968632,6001921,889396,6992,7364,0572,9964255,8962,128,=3.0=2.3=1.3=2.5na=2
36、.0=3.5,nananana=2.0nana,=3.0nana=4.8=0.63=6.0=3.8,nana505nananana,21.04.32.15.4na4.14.6,nananana-0.6nana,1.2nana2.40.93.63.9,nana655nananana,Source:Deutsche Bank and company information,Deutsche Bank Securities Inc.,Page 5,2 October 2012Metals commodity price forecastsFigure 7:Coal supply-demand mod
37、el,2008,2009,2010,2011,2012E,2013E,US coal(m tons),US Production%changeUS Demand%changeExportImportsNet exportsInventoriesDays of inventory,1,1722%1,122-1%82344719965,1,076-8%997-11%59233724590,1,0861%1,0515%82196223481,1,0961%999-5%107139422582,1,016-7%887-11%1271011723697,1,0513%9709%1151110421380
38、,Source:McCloskeys,AME Mineral Economics,BP,CEIC,IMOA,USGS,CRU,U.S.Energy Information Administration and Deutsche BankFigure 8:DB commodities price estimates summary,28-Sep-12,Spot,2008,2009,2010,2011,2012E,2013E,LT,Steam coal($/tonne),Calendar YearJapanese Fiscal Year,8484,108125,8571,9198,122130,1
39、19115,10297,8282,Met coal($/tonne),Calendar Year,140,249,172,195,289,210,183,150,Oil&gas,Natural gas($/MMBtu)Oil-WTI($/bbl),3.392,9.1100,4.162,4.380,4.195,2.795,3.896,6.0129,US steam coal prices($/ton),CAPPIBNAPPPRBWBIT,6541611041,92601001448,534755952,6543631340,7948761441,6350641039,7353681343,694
40、5631344,Benchmark used:Steam coal=Japanese Benchmark Thermal Coal;Met coal=Premium Hard Coking Coal;CAPP=Central Appalachia 12,500 Btu,1.2 SO2Coal;NAPP=Northern Appalachia 13,000 Btu,3.0 SO2 Coal;IB=Illinois Basin 11,800 Btu,5.0 SO2 Coal;PRB=Powder River Basin 8,800 Btu,0.8 SO2 Coal;WBIT=Uinta Basin
41、 11,700 Btu,0.8 SO2Source:Platts,Bloomberg Finance LP,CRU and Deutsche Bank estimates,Page 6,Deutsche Bank Securities Inc.,2 October 2012Metals&MiningNorth American CoalThermal coal outlookThe following is an excerpt from DBs thermal coal outlook by Michael Hsueh and team,published on October 2,2012
42、.Our assessment of the thermal coal market last quarter was coloured by the fall inglobal growth expectations over the second half.We continue to be cautiousregarding economic growth potential given below-50 ISM readings in China,Europe and the US,and we therefore remain conservative regarding near
43、termdemand prospects.The supply response to the lower price environment has originated from Indonesia,where a number of mining companies have announced downward revisions inproduction targets for 2012.Although Australian producers have responded with staffing cuts,these have notbeen matched with pro
44、duction cuts.Instead,small-scale Indonesian producershave made the deepest volume cuts of as much as 50%.Indian reforms in the coal and power sector continue as allocations made over the2004-2009 period are reviewed,fuel supply agreements negotiated,and pricepooling considered.While Chinese inventor
45、ies have moderated,we are mindful of the slow growth inboth power demand and coal consumption,as well as the decreased pricedifferential between imported coal and the Qinhuangdao index.On the whole,we believe that seaborne thermal coal prices will continue to beweak over the next quarter,while our l
46、onger-term view remains that oversupply inthe Pacific Basin will result in delays to high-cost Australian projects.Industrial production measures are weakGlobal measures of industrial production growth have declined relative to last quarter,with the Eurozone and India being particularly weak(Figure
47、9).Although the US andChina are strong by comparison,the weakness of gas pricing in the US continues to bea structural factor pushing coal demand down,and record US coal exports transmit thisweakness abroad.China then remains as the only mildly bullish factor for thermal coaldemand,as hydroelectric
48、production tapers down on a seasonal basis into autumn.However,growth in Chinese power demand is very weak this year,in comparison tothe preceding two years,while Chinese import price differentials have narrowedconsiderably from their peak in June.Year-over-year measures of industrial production gro
49、wth in other Asian consumingnations are also near zero.In Korea and Taiwan,growth rates were 0.13%and-0.02%in July,and 2.2%in Japan after a year-on-year spike in March and April 2012 owing tothe base effect from lower production volumes in March and April 2011 following thetsunami(Figure 10).In Chin
50、a,the volume of electricity produced has been related to the path of industrialproduction growth,although it fell to a negative 0.9%in June and grew by only 2.3%inJuly,compared to industrial production growth of 9.2%(Figure 11).This compares to agrowth in electricity production of 13.5%over June and
