Published on 16/05/2017 1:49:38 PM | Source: Emkay Global Financial Services Ltd

Hold Coal India Ltd For Target Rs320.00 - Emkay

Production slowing down while dispatch improved…

Coal India’s production fell down by 4.7% while dispatch picked up by 6% YoY.

* For the month of April’17, dispatch stood at 45.29 mt (+6%/-13% YoY/MoM). This was 91% of the target for the month. On per day basis dispatch stood at 1.5 mt/day, -10% MoM

* Production for the month stood at 38.44 mt (-4.7%/-42% YoY/ MoM). This was 88% of the target for the month. Production on per day basis came in at 1.28 mt (+-40% MoM). Production at ECL and BCCL remained off the target by 30% and 26% respectively while all other units achieved more than 85% of the volume targeted.

* No. of days of inventory at power plant declined first time since last three years and stood at 16 days for the month of April. At the same time, production has also been reduced to 38.44 mt from 40.34 mt in Apri’16 and 41.52 mt in April’15. High demand and lower production should augur well for realizations.


Our view

Coal India concluded FY17 with 3% production growth to 554mt compared to 2% growth in offtake to 543mt. Compare this number with coal offtake by power companies which stood at 390mt, -5% compared to FY16. Lower coal offtake growth from power companies may be due to inventory liquidation which in FY16 stood at 27 days compared to 19 days inventory in FY17. FY18 started with 16 days inventory of coal stocks at power plants. This with the onset of summer, when power demand is expected to increase, is likely to augur well for the offtake growth in next month and consequently in next quarter. However, structurally power demand is not expected to improve much compared to FY17 and hence offtake may not improve significantly over the time. However, spot E-Auction of coal may improve gradually given the decline in premium of spot coal vs linkages. Higher dividend yield remains main attraction in the stock at this point. We have Hold rating on the stock with a target price of Rs 320.


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