Coal India Ltd. share price target

12 February 2020 Coal Indias (COAL) results highlight the impact of lower volume offtake amid subdued thermal power demand. FSA realizations though were higher YoY on account of increased share to non-power and better grade. Production at the companys mines has started to ramp up post heavy monsoon, and we expect offtake to improve as power demand recovers. The stock trades attractively at ~3x FY21E EV/adj. EBITDA and offers a dividend yield of ~10%. Maintain Buy with a target price of INR258/sh. EBITDA (ex-OBR) declined 22% YoY to ~INR62b (our driven better-than-expected realizations. Other income rose 21% YoY to decline in sales volumes. Volumes were down 8% YoY at ~142mt (in-line). FSA volumes declined 6% YoY to 127.7mt. However, realization was up 6% YoY at INR1,411/t due to higher non-power segment sales and better grade realized. E-auction volumes declined 33% YoY to 9.8mt.

Volumes revived in Q4; low base to help volumes grow 5%+ in FY21E Coal India (COAL) reported Q3FY20 EBITDA in line with our expectation. Impacted by extended monsoon and local issues, volumes fell 8%YoY/6%YoY in Q3FY20/9MFY20. Volumes improved meaningfully December onwards with growth at 6% on the back of better condition of mines (after heavy rains), receding contractor and local level issues. In spite of weakness in E-auction...

to 17.7%. Thus, Operating Profit (OP) dropped 16% to Rs 3,611.16 crore. Performance for quarter ended September 2019 Coal India (CIL) total income from operation dropped 7% to Rs 20,382.63 crore for the second quarter ended September 2019, due to softer sales volume as prolonged rains disrupted...

Coal India (CIL) reported a steady set of Q2FY20 numbers. Higher-thanexpected FSA realisations supported overall earnings for the quarter. The company reported a sales volume of 122 million tonne (MT) (down ~11% YoY). FSA sales volume came in at 104 MT (broadly in line with our estimate of | 105 MT) while FSA realisations during the quarter was at | 1439/tonne (up 5% QoQ, higher than our estimate of | 1350/tonne). E-auction volumes came in at 15 MT (broadly in line with our estimate of 14 MT) while the eauction realisations were at | 2020/tonne (down 6% QoQ, broadly in line with our estimate of | 2000/tonne). The company reported a total operating income of | 20383 crore, down 7% YoY. EBITDA came in at | 3611.2 crore,...

12 November 2019 INR191b) in 2QFY20 due to lower sales volumes (-11% YoY at ~122mt, in-line). However, FSA realization was up 12% YoY on account of higher sales to the non-power sector and lower grade slippage. Cash cost (ex-OBR) increased 8% YoY to INR1,318/t, given negative operating leverage on lower volumes. The companys wage bill was up 1% YoY at INR90.7b. The beat was driven by increased FSA realization and higher-than-expected e- auction volumes. PBT declined 16% YoY to INR42.8b. Adj. PAT, however, was up 14% YoY to For 1HFY20, adj. EBITDA/PBT were up 1% YoY at INR117b/INR113b. Adj. PAT increased 19% YoY to INR81.5b on a lower tax rate. Cash flow from operations post tax though was down 46% YoY at INR49.

Tax rate fell by 1100bps to 28% as its five subsidiaries adopted new rate Coal India (COAL) reported Q2FY20 EBITDA above our estimates by 9% on the back of better than expected FSA realisations. Though the performance on volumes remained disappointing, company succeeded to offset the impact partially by enhancing FSA realisations through improvement in grades and higher realisations on auction of linkages in non-power segment. Admittedly, volume growth would hold the key as the performance stands unjustified in light of two major rail lines (loading incremental 20mtpa or 3.5% growth over...

Besides, even if India were to realize its true potential of ~150GW of hydro, this would imply incremental generation (at 40% PLF) of just 390BU which is not sufficient to even meet incremental demand over the next five years. Our demand-supply model for thermal coal implies demand CAGR of 6% over FY19-24 to reach 1.2bt (Exhibit COAL is trading at an FY20 FCF yield of ~9% and an EV/EBITDA of ~3x. Even if one were to make conservative assumptions of (1) capping COALs production at 710mt from FY22 and (2) a fall in share for COAL in domestic coal consumption to 50% in FY31 (68% in FY19), the PV of COALs 12-year cash flows would be equivalent to its current market cap (Exhibit implies Indias renewable capacity would reach ~310GW by FY31 (accounting for ~100% of the countrys avg.

Company is attractively trading at ~3x FY20 EV/EBITDA. Given cheap valuations, we upgrade the rating to BUY with a revised target price of Rs. 230 based on 4x FY21E EV/EBITDA. Slower growth in revenue with lower E-Auction Q1FY20 revenue grew only 2.8% YoY to Rs. 23,223cr, primarily impacted by lower revenue from e-auction which dropped 11.8% YoY to Rs. 4,106cr (representing 17.7% of total revenue. Declines in E-Auction revenue were mainly attributable to lower realized prices of Rs. 2,155/t (-10.2% YoY) and weaker sales volume during the...

Coal India (CIL) total income from operation inclined 4% to Rs 24,938.99 crore for the first quarter ended June 2019, chiefly due to rise in realization. Coal India's production grew marginal 0.1% to 136.94 million tonnes (MT) during quarter, meanwhile Offtake virtually flat at...

base) with deteriorating visibility on the state of operations. Sales volume in last four months fell by 2% YoY. The performance stands unjustified in light of two major rail lines (loading incremental 20mtpa or 3.5% growth over FY19 base) commissioned in Odisha and Jharkhand during later part of FY19. Contractor related issues, lack of last mile connectivity at recently...