Treasure Chest: Whitehaven Coal

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This story features WHITEHAVEN COAL LIMITED.
For more info SHARE ANALYSIS: WHC
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

FNArena's Treasure Chest reports on money making ideas from stockbrokers and other experts. Today's idea is 'Whitehaven Coal'.

By Danielle Ecuyer

FNArena’s Treasure Chest reports on money making ideas from stockbrokers and other experts.

Whose Idea Is It?

Morgan Stanley

The subject: 

Whitehaven Coal ((WHC)).

While hopes for a peace settlement in the Middle East war and easing energy supply pressures persist, Morgan Stanley has become the latest broker to upgrade thermal coal price forecasts, driven by ongoing gas-to-coal switching in Japan, Korea, Taiwan and Europe amid the relative price advantage over gas.

More info:

Morgan Stanley has joined Macquarie and UBS in adopting a far more upbeat outlook on thermal coal, particularly as uncertainty lingers over the extent of the energy supply shock emanating from war in the Middle East.

Stock picking remains highly tactical, the broker states, and is a key factor against a backdrop of concerns over commodities demand, and in some instances, strategic stockpiling acting as an offset, in the case of copper.

Morgan Stanley has upgraded its 2026 Newcastle thermal coal forecast to US$151/t, some 29% higher than consensus at US$117/t, and its 2027 forecast to US$138/t versus consensus at US$111/t, 23% higher.

The upgrades represent a 30% rise on the prior forecast for 2026 and up 15% for 2027.

Comparatively, met coal demand/supply dynamics are viewed as more “balanced”, albeit supportive, with cost inflation from the war. Upgraded met coal forecasts of US$231/t in 2026, and US$226/t in 2027, are 8% and 6%, respectively, above consensus estimates.

For long term pricing, inhouse commodities strategists sit 21% higher for thermal coal at US$120/t versus consensus at US$99/t, but slightly lower for metallurgical coal at US$193/t against consensus at US$121/t.

Macquarie’s latest forecasts for thermal FOB NSW at US$138/t in 2026 represent an upgrade of 29%, to sit 22% above consensus, and US$128/t in 2027, a rise of 19%, and 4% above consensus.

The met coal forecast for 2026 rises 15% to US$228/t, 7% above consensus.

The long term price forecast for thermal coal is now US$115/t, 14% above consensus from 2030-2035, and is viewed as a driving factor for the lift in net asset valuations of related companies.

The long term met coal price has lifted by a more modest 5% to US$210/t, some 6% above consensus from 2030-2035.

The sector was upgraded to Overweight.

Changing dynamics of energy supply evidenced in March

In late March, UBS observed higher European and Asian gas pricing are underpinning a switch in demand to thermal coal, which is expected to drive prices higher.

The update from Morgan Stanley concurs with this view, with the rise in energy forecasts prompting a switch from gas to thermal coal. Notably, thermal coal prices had already started to move higher in 1Q26 due to Indonesian supply cuts, as well as a pre-empting of robust gas-to-coal switching.

Further upside, as indicated by the price forecast upgrades for high-cal coal grades, is underpinned by strong demand from Japan, Korea and Taiwan, which prefer high grades.

The geographic proximity to Australian producers is likely to boost domestic demand, especially against a backdrop of higher shipping costs.

Morgan Stanley points to the most recent Indonesian media headlines and the new targeted issuance, at around 700Mt-750Mt, in line with the broker’s forecast, but with the 600Mt target not likely to be achieved, the analyst surmises the issuance reflects the government’s disposition to raise quotas if prices rise, which in turn caps the upside.

Macquarie explains the extent of extra coal needed is essentially aligned to each country’s dependence on gas-fired power generation, as well as reliance on Middle East supply. Leading the list of countries are Japan, Korea and Taiwan, followed by Europe.

The global coal balance is estimated to move into a deficit of around -57Mt, Macquarie estimates, if Indonesia retains its strict exports of 70% of the “rumoured” RKAB (Rencana Kerja dan Anggaran Biaya) annual production limit for each mining company, amounting to a national coal production quota of 650Mt.

The pick-up in demand from Japan, Korea, Taiwan and Europe is expected to more than offset the fall in demand from China.

Higher thermal price forecasts drive earnings upgrades

Macquaries’s EPS forecasts for Whitehaven have been lifted by 20% for FY26 and 27% for FY27, with an accompanying upgrade in target price to $9.25 from $8, with a Neutral rating retained.

As detailed by UBS, thermal coal is back due to higher gas prices in Europe and Asia, resulting in an upgrade to Whitehaven to Buy from Sell and a new target of $10.10.

Morgan Stanley has upgraded Whitehaven to Overweight from Equal-weight, and the stock becomes the “key” tactical commodity stock pick for its sector analysts, with a new target of $9.75, slightly down from $9.80.

The accompanying EPS forecast upgrades for Whitehaven stand at 261% for FY26 and 5% for FY27 based upon higher than consensus ROM coal production estimates, with an improving performance across both NSW and Queensland assets. Forecast coal sales are also raised, with upgrades in revenue forecasts.

FNArena’s daily monitored brokers have a consensus target of $9.342, with four Buy-equivalent ratings and two Hold.

Barrenjoey has a Neutral, Hold-equivalent rating and an $8.20 target.

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