NHC Equity Report

New Hope Corporation Ltd (ASX: NHC)

Method B default | Australian thermal coal producer with net cash, two core operating hubs, and a material strategic interest in Malabar

Share Price: A$4.51

Period End: 31 January 2026

Currency: AUD millions unless stated

Market Cap

A$3.80bn

A$3.57bn

P/E

26.6x

EV/EBITDA

7.5x

FCF Yield

4.1%

Div Yield

7.5%

52W Range

N/A

Analyst Target

N/A

1. Business Overview

New Hope is still, at heart, a coal cash-flow business. The engine room is Bengalla in New South Wales, supported by the restart and ramp-up of New Acland in Queensland, with a strategic 25.97% stake in Malabar Resources adding optionality rather than carrying the day-to-day earnings burden. What I like here is that the company is not balance-sheet stressed while it works through a softer coal-price backdrop; what I do not like is that the market is still asking investors to pay a fairly healthy multiple for earnings that have already rolled over from the peak.

The latest quarterly update was operationally constructive. Group ROM coal production rose 4.8% quarter on quarter to 4.1Mt, coal sales rose 8.2% to 2.9Mt, and realised pricing improved modestly to A$139.0/t. That is not a boom-time print, but it is enough to show that logistics have normalised and that both core assets are doing their jobs again.

Segment Snapshot	H1 FY26 Revenue	H1 FY26 EBITDA	Read-Through
Coal mining - NSW	558.3	146.4	Bengalla remains the earnings anchor despite weather and strip-ratio noise.
Coal mining - QLD	234.1	76.9	New Acland is becoming economically meaningful again as volumes rebuild.
Other	30.9	(8.5)	Smaller activities dilute the group margin but do not change the core thesis.

Operating Metrics	H1 FY26	Commentary
Coal production	5.46Mt	Production has stabilised after the FY25 weather dislocation.
Coal sold	5.57Mt	Sales are slightly ahead of production, showing improved logistics and stock drawdown.
Average realised price	A$137.8/t	Still profitable, but well below the super-normal pricing seen in FY22-FY23.
Number of mines	4	The portfolio is simpler than it was a few years ago, which I view as a positive.
Group strip ratio	4.4x	Elevated strip remains a cost headwind, though management expects moderation in 2H FY26.

Commentary: This is no longer the easy coal trade it was when prices were extreme and the stock was visibly cheap on spot earnings. The appeal now is different: a net-cash balance sheet, real dividend support, and enough operating momentum to defend value if coal prices merely stay reasonable rather than heroic.

2. Financial Performance

Income Statement	FY21	FY22	FY23	FY24	FY25	H1 FY26
Revenue	636.9	1,526.8	1,172.6	945.6	776.9	814.5
EBITDA	271.2	1,022.8	730.6	443.4	250.5	224.9
Income before extraordinary items	134.7	652.7	418.8	224.2	99.1	54.3
Diluted EPS	0.16	0.70	0.48	0.26	0.11	0.06

Margins	FY21	FY22	FY23	FY24	FY25	H1 FY26
EBITDA margin	42.6%	67.0%	62.3%	46.9%	32.3%	27.6%
Operating margin	30.3%	62.2%	56.1%	37.2%	20.0%	13.4%
Net margin	21.2%	42.8%	35.7%	23.7%	12.8%	6.7%

Cash & short-term investments

A$616.8m

H1 FY26

Debt

A$382.6m

Includes 2029 convertible notes

Net cash

A$234.2m

Negative net debt remains a major stabiliser

Common equity

A$2.60bn

Asset backing still matters here

Cash Flow Summary	FY21	FY22	FY23	FY24	FY25	H1 FY26
Operating cash flow	233.7	686.0	541.3	431.4	253.9	185.0
Capital expenditure	30.9	59.6	119.9	123.4	176.5	96.4
Free cash flow	202.8	626.4	421.4	307.9	77.4	88.7

Commentary: The financial pattern is exactly what you would expect from a coal producer coming off a commodity windfall. Revenue, margins and earnings have compressed sharply from the FY22-FY23 peak, but the business has not stumbled into distress because the balance sheet was fortified while the cycle was strong. That distinction matters: NHC is lower quality on earnings visibility than a stable industrial, but materially higher quality on downside protection than a miner carrying heavy net debt.

3. Valuation - Enterprise Cross-Check

I do not think a pretend precision DCF helps here unless we have an explicit mine plan, volume bridge, realised price deck, cost deck, WACC build and terminal assumptions. The materials supplied support something slightly more honest: an enterprise cash-yield framework anchored to NHC's net cash balance and a range of steady-state FCF outcomes.

Enterprise Framework Assumptions	Bear	Base	Bull
Steady-state free cash flow (A$m)	180	260	340
Required enterprise FCF yield	8.0%	7.0%	6.0%
Net cash adjustment (A$m)	234	234	234
Share count (m, diluted)	906	906	906

Bear

A$2.74

Base

A$4.36

Bull

A$6.51

Current

A$4.51

Commentary: On that framework, the current share price sits almost exactly on my base case. That is a fair place for the stock to trade if you believe NHC can hold a mid-cycle cash machine together and keep the balance sheet clean. It does not look screamingly cheap. It looks defensible, income-backed, and vulnerable to disappointment if pricing or strip-normalisation slips again.

Equity Value per Share	FCF A$180m	FCF A$220m	FCF A$260m	FCF A$300m	FCF A$340m
8.0% required yield	2.74	3.29	3.85	4.40	4.95
7.0% required yield	3.10	3.73	4.36	4.99	5.62
6.0% required yield	3.57	4.31	5.04	5.78	6.51
5.0% required yield	4.23	5.12	6.00	6.88	7.76
4.5% required yield	4.67	5.65	6.64	7.62	8.60
4.0% required yield	5.23	6.33	7.43	8.54	9.64
3.5% required yield	5.94	7.20	8.46	9.72	10.98

Base-case cell highlighted. The exercise is intentionally simple: it tests what price the market can justify under different sustainable cash outcomes, rather than pretending we have a fully specified long-dated DCF model.

4. Valuation - Economic Profit

Economic profit is where the recent picture gets less flattering. I estimate NOPAT as operating profit after a 30% tax charge and invested capital as equity plus debt less cash. Using a 9.5% capital charge, NHC moved from strong value creation in FY22-FY24 back into value destruction in FY25 and H1 FY26. That is exactly what a cyclical miner looks like when spot economics cool down.

Economic Profit Snapshot	FY21	FY22	FY23	FY24	FY25	H1 FY26
NOPAT	134.9	664.3	460.2	245.9	108.7	76.4
Average invested capital	1,919.9	1,788.3	1,855.7	2,080.1	2,279.7	2,365.7
ROIC	7.0%	37.1%	24.8%	11.8%	4.8%	3.2%
Assumed capital charge	9.5%	9.5%	9.5%	9.5%	9.5%	9.5%
ROIC - capital charge spread	(2.5%)	27.6%	15.3%	2.3%	(4.7%)	(6.3%)
Economic profit	(47.5)	494.4	283.9	48.3	(107.8)	(148.3)

Commentary: This is the key valuation tension. The stock still has balance-sheet quality, but the operating return profile has slipped below the cost of capital on my rough estimate. That is why I cannot justify paying a growth multiple for it. The share price only works if you treat NHC as a cash-yielding cyclical with balance-sheet optionality, not as a compounding franchise.

5. Valuation Summary - Football Field

Enterprise yield range

2.74 - 6.51

Dividend / asset backing range

3.78 - 5.66

Book value cross-check

3.71 - 5.56

Analyst consensus

N/A

Commentary: The football field says something simple: valuation is no longer one-way cheap. Balance-sheet and dividend support cluster around the current price, while the enterprise-yield range stays wide because a small change in sustainable cash flow drives a large change in value.

In other words, NHC now trades more like a debate about what "normal" coal cash generation should be than a clear mispricing. If you are bullish, you are really backing stable operations, decent realised pricing and capital discipline. If you are bearish, you are saying trailing earnings still flatter the true through-cycle economics.

6. Savings Account Test

NHC's implied cash return on enterprise value

4.06%

Deposit: EV of A$3.57bn. Interest: free cash flow. Interest rate: free cash flow divided by EV.

Benchmark	Reference Yield	NHC vs Benchmark
Australian 10-year government bond	~4.40%	Below
Competitive 12-month term deposit	~4.75%	Below
ASX 200 implied earnings yield	~5.3%	Below

Commentary: This is the section that makes me pause. A 4.06% enterprise cash yield does not comfortably beat risk-free alternatives, nor does it beat the broader market's earnings yield by enough to compensate for commodity cyclicality. NHC can still work as an income stock because the dividend yield is higher than the enterprise yield and the balance sheet is strong, but on a whole-business basis the market is not giving you a bargain.

7. Allen / Plato Red Flags Assessment

Flags

Watch

Clear

Category	Status	Detail
Negative Operating Cash Flow	CLEAR	Operating cash flow remained positive at A$185.0m in H1 FY26.
Earnings-to-Cash-Flow Divergence	CLEAR	Cash generation still exceeds reported profit, which supports earnings quality.
Excessive Debt	CLEAR	The group sits in net cash, not net debt.
Insider Selling	CLEAR	The supplied insider file shows disclosed open-market purchases, not selling. The cleanest signal came from Chairman Robert Millner buying 75,000 shares in March 2025 and a further 25,000 shares in September 2025.
Executive Remuneration	WATCH	Remuneration detail was not in the uploaded files.
Corporate Governance	WATCH	No obvious governance problem surfaced here, but this pack was not governance-heavy.
Related Party Transactions	WATCH	No clean disclosure pack for related-party review was supplied.
Auditor Quality	WATCH	Auditor detail was not included in the files reviewed.
Aggressive Growth Expectations	WATCH	At 4.06% enterprise FCF yield, the market is not pricing distress and still assumes decent cash durability.
High Beta (danger > 1.5)	WATCH	Beta data was not supplied, though the sector is inherently cyclical.
Non-Standard Performance Metrics	FLAG	Quarterly messaging leans on underlying EBITDA, which can soften the edges of cyclical profit pressure.
Overstated Receivables / Inventory	CLEAR	Receivables and inventory appear manageable relative to the balance sheet.

Insider Transaction Snapshot

Date	Insider	Role	Type	Shares	Price	Read-Through
23 Sep 2025	Robert Millner	Non-Executive Chairman	Purchase	25,000	A$2.79	Open-market buying by the chair is supportive, especially below the current share price.
30 Jun 2025	Robert Bishop	Chief Executive Officer	Acquisition / Disposition (J)	419,865	N/A	Looks more like a structured equity movement than discretionary market selling.
30 Jun 2025	Dominic O'Brien	General Manager	Acquisition / Disposition (J)	219,045	N/A	Not a negative signal on its own, but I would classify it as administrative rather than conviction buying.
30 Jun 2025	Rebecca Rinaldi	Chief Financial Officer	Acquisition / Disposition (J)	170,497	N/A	Again, this reads like a remuneration-related movement, not disposal pressure.
25 Mar 2025	Robert Millner	Non-Executive Chairman	Purchase	75,000	A$2.57	A larger open-market buy that now sits well in the money.
28 Feb 2025	Lucia Stocker	N/A	Purchase	4,901	A$2.50	Small in size, but directionally consistent with insider alignment.

Commentary: The insider tape is a net positive for the report. I do not see evidence of executives rushing for the exits. The only clear discretionary trades in the supplied file are purchases, and they were made at prices materially below today's A$4.51 share price. That does not make the stock cheap by itself, but it does remove one soft red flag from the story.

CAUTION

8. Risks & Considerations

Coal price risk: NHC remains highly exposed to benchmark coal pricing. The market has already digested a large earnings reset from the FY22-FY23 peak, but the current price still assumes a reasonably healthy mid-cycle environment. If realised pricing weakens again, the stock can de-rate quickly.

Operational normalisation risk: The recent quarterly report was encouraging, but part of the investment case depends on Bengalla returning to more normal strip ratios and production settings in the second half. If that normalisation drifts, the "base case" becomes harder to defend.

Capital allocation risk: A strong balance sheet is a strategic asset only if management preserves it. Large acquisitions, overly generous buy-backs at the wrong point in the cycle, or weak capital discipline would hurt the valuation support that currently makes the story investable.

Policy and social licence risk: Coal businesses do not enjoy the same margin of political and financing safety as ordinary industrials. Approval delays, regulation, rehabilitation obligations and lender appetite all matter, even when current operating performance is fine.

Convertible note overhang: The 2029 convertibles are manageable, but they still matter. They add financing complexity and can shape how investors think about downside protection, dilution and future capital management.

9. Analyst Consensus

Consensus Metric	Value
Strong Buy	N/A
Buy	N/A
Hold	N/A
Sell	N/A
Strong Sell	N/A
Mean Rating	N/A
Mean Target Price	N/A
Median Target Price	N/A

Commentary: Analyst target and recommendation data were not included in the supplied files, so I would not pretend to have a consensus anchor. In practical terms, that leaves the market price, cash yield and asset backing doing most of the analytical heavy lifting.

1. What Does New Hope Do?

New Hope is an Australian coal producer. Its main earnings come from Bengalla in New South Wales and New Acland in Queensland, with an extra stake in Malabar Resources adding upside if that project keeps developing well. This is basically a cash-generating mining business, not a high-growth technology story.

2. How Has the Business Been Performing?

The recent quarter was better operationally than the market might have feared. Production and sales both improved, and realised prices edged up. The bigger picture, though, is that profits are still well below the extraordinary coal boom period from a couple of years ago. So the business is stable, but it is no longer printing windfall profits.

3. What Is It Actually Worth?

Using a simple cash-generation framework, I get a wide valuation range of roughly A$2.74 to A$6.51 per share, with a base case of about A$4.36. The current price is A$4.51, which means the stock looks roughly fair rather than obviously cheap.

4. The Savings Account Test

NHC's whole-business cash return is about 4.06%. That is below a 10-year Australian government bond, below a strong term deposit, and below the broad sharemarket's earnings yield. That does not make it bad, but it does mean you are not being paid an enormous premium for taking coal risk.

5. Are There Any Red Flags?

The good news is that the balance sheet is strong, the company is in net cash, and the insider-trading file shows buying rather than selling. The less comfortable part is that the market still expects decent future cash generation, and some of management's preferred reporting language uses adjusted measures rather than just plain statutory profit. I would call the stock investable, but not carefree.

6. Bottom Line

Bottom line: New Hope looks like a solid, income-supported cyclical rather than a deep bargain. If you want a coal exposure with a clean balance sheet and a meaningful dividend, it is understandable. If you want obvious upside from today's price, I think the case is harder. At A$4.51, the shares look closer to fair value than to a bargain basement opportunity.