Whitehaven Coal (WHC) – Commodity tailwinds picking up

Whitehaven Coal develops and operates coal mines in Queensland and New South Wales. The company produces metallurgical and thermal coal. It operates mines, including open-cut and underground, located in the Gunnedah Coal Basin in New South Wales. The company sells coal in Japan, China, Korea, Taiwan, Malaysia, Vietnam, Indonesia, India, Europe, and internationally. Whitehaven Coal Limited was founded in 1999 and is based in Sydney, Australia.

Whitehaven Coal delivered a strong December-quarter result, with managed production of 8.7 million tonnes(Mt) exceeding Ord Minnett’s expectations by circa 10% and net debt declining faster than expected to $700 million, some 6% below our estimate. The improving outlook for metallurgical coal provides a significant tailwind, and we forecast a strong underlying free cash flow (FCF) outlook for CY26 of $590 million for an 8% yield, based on our commodity price forecast of US$210 a tonne for premium low-volatile hard coking coal (PLV-HCC) in CY26. There is upside to this if spot prices hold, i.e. circa $805 million FCF for a 10% yield.

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Incorporating the December-quarter result means our target price increases 4% to $9.90 as we increase our multiples to reflect historical trading (net of some other adjustments). We reaffirm our Accumulate recommendation given the outlook for underlying FCF and shareholder returns, although we note Whitehaven is starting to screen less attractively against smaller peers that have greater metallurgical coal exposure.

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