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Reports a mixed bag of earnings

* COAL reported a largely in line 4QFY22, but e-auction premiums, the mainstay of its profitability, disappointed both in terms of volume and premium. Cost control, especially in contractual costs, resulted in a marginal beat on adjusted EBITDA in 4QFY22.

* Net sales grew 22% YoY and 15% QoQ to INR327b in 4QFY22. The QoQ growth in sales was driven by a 4% growth in dispatches, 8% higher FSA prices, and 25% growth in e-auction prices. e-auction premium in 4QFY22 was 57% against our assumption of 90%. As a result, net sales were 7% lower than our estimate

* Adjusted EBITDA (net of OBR) grew 56% YoY and 69% QoQ to INR125b, 6% higher than our estimate. The EBITDA beat, despite a miss on revenue, was largely due to lower material cost and contractual expenses.

* PAT grew 46% YoY and 47% QoQ to INR67b in 4QFY22, 10% below our estimate due to a sharp uptick in OBR, which stood at INR34b (up 1x YoY and 5x QoQ, est. INR12b). The spike in OBR in 4QFY22 was significantly higher than usual corresponding periods.

* Net sales/adjusted EBITDA/PAT grew 22%/42%/37% YoY to INR1,097b/ INR285b/INR174b in FY22. The lower PAT growth in FY22 was attributed to its highest ever quarterly provisioning of OBR

Lower than our estimate e-auction volumes and premiums

* e-auction volumes fell 4% YoY, but grew 7% QoQ to 27.7mt in 4QFY22. eauction realization grew 39% YoY and 25% QoQ to INR2,434/t in 4QFY22. However, e-auction premium over FSA was only 65% in 4QFY22, despite a significantly higher e-auction premium, as per the monthly reported data.

* e-auction premium since Nov’21 has been significantly higher than the reported number in 4QFY22. From Dec’21 to Mar’22, e-auction premium remained over 100%. The same stood over 290% in Mar’22.

* The higher e-auction volumes dispatched in 4QFY22 could be due to auctions in prior months. The e-auction premium and value is likely to be higher going forward as e-auction trends since Sep’21 show a marked improvement in premium.

The outlook remains positive, maintain Buy

* COAL had registered strong e-auction premium from Nov’21 to Mar’22. However, it lagged volumes in Apr’22, given the pressure to increase supplies to the Power sector. With the onset of the monsoon, demand for coal from the Power sector is likely to reduce. However, demand from the non-Power sector is unlikely to diminish, given the strong global prices.

* This should result in higher volumes for the non-regulatory sector (NRS) in coming months. We maintain our Buy rating, with a revised TP of INR230/share, at 4x FY23E EV/EBITDA.

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