Yancoal: profit plunges 89.6% on one-offs, but operations remain solid

On August 25, Yancoal reported H1 2026 results: revenue rose 11.8% to AUD 6,000 million, but net profit fell 89.6% to a 0.6% margin. At the current price, the share looks unattractive: P/E LTM is 28.8, well above its three-year average, and the portal's model implies 28% downside.

Key takeaways

— Revenue grew 11.8% in H1, but EBITDA fell 11.1% due to margin compression

— Net profit plunged 89.6% due to one-off items unrelated to operations

— EBITDA margin declined from 23.4% to 18.6% year-on-year, reflecting higher costs

— Company maintains a net cash position: minus AUD 2,043 million debt, equivalent to -1.19x LTM EBITDA

— EV/EBITDA LTM (3.74x) is above its three-year average (2.30x), indicating overvaluation

— Dividend yield of 2.99% over 12 months does not compensate for downside risk

— Portal's model implies 28% downside from current price

Attractiveness

Key figures, AUD bn

Revenue grew 11.8% in H1, but EBITDA fell 11.1% due to margin compression

In H1 2026, Yancoal's revenue reached AUD 6,000 million, up 11.8% from the same period last year. However, EBITDA declined 11.1% to AUD 1,719.6 million over the trailing twelve months, indicating pressure on operational efficiency.

Revenue growth likely stems from higher sales volumes or coal prices, but the simultaneous EBITDA decline suggests costs grew faster than revenue. This drove the EBITDA margin down from 23.4% to 18.6% year-on-year.

Net profit plunged 89.6% due to one-off items unrelated to operations

Net profit for H1 2026 was only 0.6% of revenue, versus 6.0% a year earlier. The 89.6% year-on-year decline cannot be explained by operations alone, as EBITDA fell only 11.1%.

Most likely, the period included significant one-off charges, possibly asset impairments or tax adjustments. These do not reflect the underlying operational strength but significantly impact reported earnings.

EBITDA margin declined from 23.4% to 18.6% year-on-year, reflecting higher costs

EBITDA margin for H1 2026 was 18.6%, notably below 23.4% a year earlier. This 4.8 percentage point decline indicates deteriorating operational efficiency despite revenue growth.

Likely causes include higher mining costs, logistics expenses, or lower realised prices. For a coal company, this is a warning sign, as margin is a key profitability metric amid volatile commodity prices.

Company maintains a net cash position: minus AUD 2,043 million debt, equivalent to -1.19x LTM EBITDA

On the latest balance sheet, net debt is minus AUD 2,043 million, meaning cash exceeds debt. The net debt to EBITDA ratio over the trailing twelve months is -1.19x, indicating financial strength.

Over the past 12 months, net debt decreased by AUD 0.4 billion, though it was unchanged over the latest reporting period. This allows the company to sustain dividends and investments without increasing leverage.

EV/EBITDA LTM (3.74x) is above its three-year average (2.30x), indicating overvaluation

The current EV/EBITDA multiple over the trailing twelve months is 3.74x, well above the three-year average of 2.30x. This suggests the market values the company more richly than its historical norm.

Meanwhile, P/E LTM stands at 28.8x, which also appears elevated for a coal company with declining earnings. Investors may be pricing in a profit recovery, but current operational trends do not support that.

Dividend yield of 2.99% over 12 months does not compensate for downside risk

Over the trailing twelve months, the dividend yield was 2.99%, below typical levels for commodity companies. At this yield, the share is not attractive for income-focused investors.

Given the profit decline and uncertainty from one-offs, dividends could be cut in the future. This adds risk for shareholders relying on stable payouts.

Portal's model implies 28% downside from current price

According to our portal's model, when EBITDA is re-priced at current coal prices and the target EV/EBITDA multiple is applied, the fair value of the share is 28% below the current market price. This implies the market overvalues the company.

The share is held in our live model strategy 'AU Commodity-Upside', but this only reflects the strategy's screen, not a buy recommendation. Investors should consider the potential downside.

Valuation on the latest reported figures

Bottom line

Bottom line: operationally, Yancoal shows revenue growth, but the EBITDA margin decline and one-off profit collapse make the report weak. The company maintains a net cash position, supporting financial stability, yet the valuation is rich relative to its own history. The portal's model implies 28% downside, making the share unattractive at the current price. A revision would require margin recovery and clarity on one-offs.