Brokers' take
Add BT as a preferred sourceCoal sector | Overweight Phillip Securities Research, Oct 11
The China authority learned lessons from last winter's coal-to-gas conversion programme. Hence, the authorities are now slowing down the pace of reduction rather than an abrupt cut in coal consumption this year. Since the demand for thermal power could surge in the near term, the authorities still aim to ensure the profitability of domestic coal producers.
External demand favours the coal miners in Indonesia. With the increase in export target announced by the authorities, the export demand will see new highs in Q4 2018. However, the room for growth of production is limited due to the bottleneck of capacity resulting from equipment supply. We believe this is a short-term issue, and it will take three to six months to ramp up capacity. We expect Harga Batubara Acuan (HBA) to average US$100 a tonne in Q4 2018. We remain positive on the sector as we expect the coal price will be favourable for coal miners. Meanwhile, the ramp-up of production is still on track. We maintain an "overweight" rating on the coal sector.
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