Record Coal Volumes And Low Leverage Will Support Stronger Long Term Prospects

Catalysts

About Semirara Mining and Power

Semirara Mining and Power Corporation is an integrated coal mining and power generation company in the Philippines, operating coal mines on Semirara Island and coal fired power plants in Calaca.

What are the underlying business or industry changes driving this perspective?

• Record coal production near the environmental compliance certificate limit of almost 20 million metric tons, together with record power output and a stable 41% core EBITDA margin in the power segment, points to operational scale that can support higher revenue and earnings if pricing or volumes stay firm.
• Very low leverage, with total debt at about 2% of total assets and the coal segment carrying only PHP 280 million of debt on PHP 31 billion of equity, gives room to fund refleeting, mine development and potential power expansion without heavy interest expense, which supports net margins and future earnings capacity.
• The upcoming Semirara coal operating contract bid round, where management sees itself as well placed to submit a strong mine plan backed by existing infrastructure and technical experience, could extend access to a large, already operating resource base and allow production volumes to be sustained or scaled, reinforcing long term revenue visibility.
• Opening of the Acacia mine, together with better access to coal seams and higher inventories, is expected to improve coal quality and marketability versus the current high ash, higher sulfur mix from Narra, which can help narrow the gap between production and shipments and support coal selling prices, shipment volumes and segment earnings.
• Growing contracted capacity in the power business, with 46% of dependable capacity locked in and a higher share of bilateral contracts that supported a larger earnings contribution from power, provides a more predictable earnings base and may smooth revenue and net income through commodity price cycles.

Assumptions

How have these above catalysts been quantified?

• This narrative explores a more optimistic perspective on Semirara Mining and Power compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Semirara Mining and Power's revenue will remain fairly flat over the next 3 years.
• The bullish analysts assume that profit margins will increase from 25.0% today to 29.8% in 3 years time.
• The bullish analysts expect earnings to reach ₱15.4 billion (and earnings per share of ₱3.63) by about March 2029, up from ₱13.1 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as ₱11.1 billion.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 16.8x on those 2029 earnings, up from 9.4x today. This future PE is greater than the current PE for the PH Oil and Gas industry at 11.4x.
• The bullish analysts expect the number of shares outstanding to grow by 0.63% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.25%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The Semirara coal operating contract COC #5 expires in July 2027 and is currently under a competitive bid process that includes large Philippine conglomerates. An unfavorable outcome or stricter work program requirements could reduce or remove access to the core coal resource and materially affect long term coal production volumes and revenue.
• Energy markets are already described as stabilizing with softer coal and power prices that contributed to a 33% decline in group net income to ₱13.1b in 2025. A prolonged period of moderated or weaker prices for Newcastle, ICI 4 and WESM could compress realized selling prices and keep net margins and earnings under pressure even if operational performance remains strong.
• Long term sector trends are shifting toward renewables, with an additional 4,000 megawatts of renewable capacity and a new baseload plant expected to enter the Luzon Visayas grid and renewable energy enjoying priority dispatch. This could structurally limit spot prices and utilization for coal fired plants and weigh on the power segment’s revenue and core EBITDA margins.
• Operational and quality issues in the coal business, including chronic water seepage at Acacia mine and a high ash, high sulfur output from Narra that already forced a focus on lower priced domestic buyers and led to shipment deferrals, could persist and result in larger gaps between production and shipments. This could lower realized coal prices and segment earnings.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Semirara Mining and Power is ₱43.23, which represents up to two standard deviations above the consensus price target of ₱29.97. This valuation is based on what can be assumed as the expectations of Semirara Mining and Power's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₱43.23, and the most bearish reporting a price target of just ₱20.0.
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2029, revenues will be ₱51.9 billion, earnings will come to ₱15.4 billion, and it would be trading on a PE ratio of 16.8x, assuming you use a discount rate of 11.3%.
• Given the current share price of ₱28.9, the analyst price target of ₱43.23 is 33.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.