Published on 12/11/2020 11:43:14 AM | Source: ICICI Direct

Hold Coal India Ltd For Target Rs.150 - ICICI Direct

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Steady performance....

Coal India (CIL) reported an operationally steady set of Q1FY21 numbers. For the quarter, topline came in lower than our estimate while EBITDA and PAT came in higher than our estimate. CIL reported sales volumes of 120 million tonne (MT), down 22% YoY, 27% QoQ. Total operating income was at | 18486.8 crore (down 26% YoY, 33% QoQ), lower than our estimate of | 19986.8 crore. EBITDA came in at | 3051.7 crore (down 54% YoY, 55% QoQ) but higher than our estimate of | 2098.6 crore. EBITDA margin was at 16.5% (26.5% in Q1FY20, 24.4% in Q4FY20), higher than our estimate of 10.5%. Ensuing PAT came in at | 2077.5 crore (down 55% both QoQ, YoY) but higher than our estimate of 1439.4 crore.


YTD, both production, offtake remain lower YoY...

In the current fiscal (YTD), the company witnessed a muted trend in both production and offtake volumes. During April-August 2020 (YTD), CIL reported production of 195.5 MT (down 7.0% YoY) while offtake during the period was at 208.4 MT (down 13.4% YoY). During the current fiscal, August 2020 is the only month where the company was able to report growth in production and offtake on a YoY basis. For August 2020, CIL’s coal production increased 7.1% YoY to 37.2 MT (34.7 MT in August 2019) while coal offtake increased 9.3% YoY to 44.3 MT (40.6 MT in August 2019). Going forward, in FY21E and FY22E, we model an offtake volume of 550 MT and 575 MT, respectively. For FY20, production volume was at 602 MT (down 1% YoY) while offtake volume was at 581 MT (down 4% YoY).


EBITDA margins to hover at ~18% in next couple of years...

We expect EBITDA margins to hover at ~18% in the next couple of years (18% for FY21E, 18.3% for FY22E, FY20 EBITDA margin at 22.8%). EBITDA margin is likely to decline from FY20 levels due to a muted trend in e-auction realisations and overall subdued trend in offtake volumes.


Valuation & Outlook

CIL reported an operationally steady Q1FY21 performance. Going forward, we model sales volume of 550 MT for FY21E and 575 MT for FY22E. Furthermore, we expect EBITDA margins to hover at ~18% over the next couple of years. We value the stock at 5x FY22E adjusted EV/EBITDA and arrive at a target price of | 150. We maintain our HOLD recommendation.


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