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Strong profitability; Volume target on track

Coal India (COAL IN) reported higher than estimate EBITDA ex OBR at Rs119bn (CentrumE: Rs109.5bn), up 6.2% YoY/ up 34% QoQ and EBITDA/t declined by 2.4% YoY at Rs624/t (CentrumE: Rs573/t). The YoY increase is primarily due to increase in sales volume (up 8% YoY) partially offset by 6% YoY fall in blended realisation. The FSA and e-auction sales volume increased by 9% YoY and 8% YoY, while, realisation declined by 6.4% YoY and 34% YoY respectively due to higher premium in base year. Employee cost remain steady YoY at Rs115bn; however, on per tonne basis, declined by 9% YoY. Hence, overall CoP/t declined by 7.1% YoY. We incorporate higher volume by 3.5%/4.5% as well as lower CoP resulting in 23%/28% increase in FY25/FY26 EBITDA, respectively. Hence, our target price is revised upwards to Rs458/sh, valuing at 5x average FY25E/FY26E EV/EBITDA. We maintain ADD rating

FSA volume increased 9% YoY; E-auction volumes up 53% YoY

COAL’s revenue increased 2.8% YoY to Rs361.5bn due to higher volume partially offset by lower realisation. Overall volume increased 8.8% YoY to 191mt (FSA volume up 9.2% YoY to 172mt while e-auction volume was up 7.6% YoY to 15.8mt). During Q3FY24, E-auction sales recorded fall of 29% YoY as e-auction premium stood lower at 117% vs 241% in Q3FY23. The e-auction coal price declined 34.2% YoY to Rs3,321/t. FSA revenue was up 12.8% on back of higher volume (up 9% YoY) as well as price was up 3% YoY to Rs1,532/t. Blended coal realization, at Rs1,727/t, was down 6.4% YoY

EBITDA/t stood lower 2.4% YoY at Rs624/t

Employee cost during the quarter was flattish to Rs115.7bn YoY. Employee cost per tonne basis stood ~9.2% YoY lower at Rs582/t. Overall CoP, at Rs1,266/t, was down 7% YoY. As a result, EBITDA (ex-OBR)/t was down ~2.4% YoY to Rs624. COAL recorded e-auction derived EBITDA/t of Rs2,055/t down 44% YoY owing to sharp fall in premium while FSA derived EBITDA/t expanded to Rs266/t (vs Rs120/t in Q3FY23) owing to 3.3% YoY increase in realisation and decrease in CoP.

Maintain ADD with a target price of Rs458

We believe coal demand will remain high and COAL will be able to efficiently increase volume by 7% CAGR over FY23-26. Besides, incremental volume of more than 150mt will generate sustainable EBITDA/t of ~Rs1000/t. High profitability will ensure enough cash after capex (FY24-26: FCF of Rs190-280bn/year) for higher dividend. We expect DPS of Rs30/30 in each of FY24/FY25; a dividend yield of 7%. Our target price is Rs458, valuing COAL at 5x average FY25E/FY26E EV/EBITDA. Maintain ADD.

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