Buy Coal India Ltd For Target Rs.560 By Motilal Oswal Financial Services Ltd
Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel
Revenue in line; earnings hit by weak e-auction volumes and high costs
* 2QFY25 revenue stood at INR307b (-6% YoY/-16% QoQ), in line with our est. of INR317b. Blended ASP stood at INR1,622/t (-6% YoY and -3% QoQ), 8% below our estimate.
* Adj. EBITDA (excluding OBR costs) stood at INR72b (-20% YoY/-38% QoQ), below our est. of INR99b due to lower-than-expected e-auction volumes and elevated costs. Adj. EBITDA/t stood at INR426/t (-17% YoY/-27% QoQ) vs. our estimate of INR595/t.
* APAT came in at INR63b (-22% YoY/-43% QoQ), below our estimate of INR81b due to weak operating performance and lower other income. In 1HFY25, revenue declined 2% YoY, while adj. EBITDA and APAT fell by 7% YoY. 2Q production stood at 152mt (-3% YoY/-20% QoQ) as heavy monsoons affected mining operations. Sales volume stood at 168mt (-3% YoY/-15% QoQ). FSA realization stood at INR1,462/t, down 5% YoY and 4% QoQ, with FSA volume of 148mt (-4% YoY/-14% QoQ).
* E-auction volume stood at 15mt (-5% YoY/-35% QoQ) with an e-auction premium of 69% vs. 58% in 1QFY25.
* COAL declared an interim dividend of INR15.75 per share in 2Q.
Valuation and view
* 2Q performance was weak as overall volumes were affected by monsoon and costs remained high. A lower proportion of e-auction volumes also affected profitability.
* We cut our FY25 revenue est. by 3% and EBITDA/APAT est. by 7% each to factor in weak 2Q performance and lower volumes due to monsoons. In 2HFY25, we expect revenue/EBITDA/APAT to grow 5%/3%/-6% YoY. For FY26/FY27, we maintain our estimates and expect volumes to improve, which would boost earnings performance. The e-auction premium is expected to remain stable ahead.
* With a robust volume outlook, healthy e-auction premiums and lower operating costs, the long-term outlook for COAL remains positive.
* COAL is increasing its coal-washer capacity by setting up eight coking coal washeries, which will strengthen its position in domestic coking coal. Further, the company expects coal mine expansions to be funded via internal accruals and might borrow to undertake certain strategic diversification projects, such as RE facilities and coal gasification.
* At CMP, the stock is trading at 4.2x FY27E EV/EBTIDA. We reiterate our BUY rating with a revised TP of INR560 (5.5x on Sep’26 EV/EBITDA).
* COAL remains our top pick in the metals and mining sector.
For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412
