Coal India Ltd. share price target

COAL needs to spend c40+% (FY15-21E) of OCF on capex, yet EBIT growth is mainly driven by price hikes. COAL is a cash (dividend) cow as it pays all FCF after capex as dividends. In our view, this is the only benefit that minority shareholders get. We thus believe a realistic way to value COAL is to focus on its dividend paying potential, hence we use DDM to value COAL. We maintain our SELL rating on COAL with a TP of Rs199. COAL reported strong Q4FY19 that beat market expectations comprehensively driven by better FSA realization & bonus related to FSA vol, which were offset partly by higher than expected employee cost. Overall, the result was a beat at the Revenue / EBITDA/PAT level. More importantly, this result doesn't setup COAL in a position to even meet our FY19 div est. of Rs 17/sh. Dividend announced thus far in FY19E is Rs 13.1/sh and there is little scope for a further round of div for the year.

grew to Rs 8,212.22 crore from Rs 193.34 crore corresponding previous quarter. Other income declined 10% to Rs 1,819.58 crore, thus, the PBIDT inclined 355% to Rs 10,031.80 crore. The Company interest cost fell 9% to Rs 101.93 crore, while depreciation cost grew 11% to Rs...

by adjusting from revenue against earlier practice of providing as cost. Accordingly, revenues for FY19 were revised lower by Rs5bn to account for grade slippage. Hence, we keep our estimates unchanged for FY20e and FY21e as volatile grade and lower E-auction volumes would offset higher pregrade adjustment realisations. Volumes growth continued to remain weak due to structural issues related to land acquisition, logistics and statutory clearances. Volumes for Apr'19 grew...

Revenue grew 6% YoY to ~INR285b (our estimate: INR283b) in 4QFY19, led by an increase of (a) ~4% YoY in FSA realization (INR1,460/t v/s our estimate of INR1,388), (b) 30% in e-auction realization (INR2,754/t v/s our estimate of INR2,619) and (c) ~2% in volumes (163.1mt; volume mix was weak). FSA realization was supported by better grade management and mine mix. Cash cost (ex-OBR) increased 5% YoY to INR1,110/t due to a higher wage bill (includes INR6.5b for prior-period pension provision and INR3-4b for bonus provisions). Excluding the wage bill, cash cost was down ~4% YoY....

Currently, dividend yield has increased to 9-10% with current valuations at 45-50% discount to long-term averages, which is a typical trait of a commodity stock at the peak of an earnings cycle. Selling price of FSA coal is currently at 50% discount to E-auction prices i.e. market price, which means there is still significant pricing power left with the company. Only 19% of the revenue is subject to the market price of coal and is cyclical in nature. If we were to model historically the lowest E- auction price of INR1,536/t (in FY17), the stock would still be trading at 4.3x EV/EBITDA, P/E of 9.2x and dividend yield of ~8%, which means valuations would still range between 35-40% discount to historical averages. REs share in the power mix can reach maximum of 35% in India, which means that an average demand of 250-280GW will have to be met by coal.

55% to Rs 6,787.81 crore. Coal India's production increased by 2.6% at 155.97 million tonnes (MT) during quarter, meanwhile Offtake raised by 0.9% to 153.83 MT. CIL's average realizations increased 11.6% to Rs 1,520 per tonne. Coal India (CIL) total income from operation inclined 15% to Rs 25,045.83 crore for the third quarter ended December 2018, due to rise in sales volume and in realization. Coal India's production increased by 2.6% at 155.97 million tonnes (MT) during quarter, meanwhile Offtake...

Coal India reported a healthy set of Q3FY19 numbers albeit lower eauction volumes acted as a dampener. E-auction volumes were at 14.7 million tonnes (MT), down 44% YoY, 17% QoQ. E-auction realisations came in at | 2847/tonne, up 42% YoY, 10% QoQ Sales volumes were at 154 MT, up 1% YoY. FSA volumes during the quarter were at 135.8 MT, up 11% YoY. FSA realisations were at | 1334/tonne (up 13% YoY, 2% QoQ vs. our estimate: | 1315/tonne) Topline came in at | 25045.8 crore, up 15% YoY, 14% QoQ, higher than our estimate of | 24545.7 crore. Reported EBITDA came in at...

We maintain our SELL rating on COAL. COALs Revenue/EBITDA/PAT of Rs 250.5/67.9/ 45.7bn were well ahead of street estimates of Rs 238.2/50.1/38.1bn, driven by 1) good FSA realization at Rs 1,334/t (+2% q/q, +13% y/y) 2) strong e-auction realization at Rs 2,892/t (+10% q/q, +43% y/y & 113% premium to FSA price vs 98/69% in 2QFY19/3QFY18) 3) in-line costs 4) operating leverage due to higher sales volume at 154 mt (+12% q/q).

12 February 2019 COAL has managed to keep cost under control despite inflationary pressure Revenues increased 16% YoY to ~INR250b, as against our est. of INR239b, led by (a) FSA realization increase of ~13% to INR1,334/t, as against our est. of INR1,310/t, (b) e-auction realization increase of 43% (10% QoQ) to INR2,847/t, as against our est. of INR2,500/t, and (c) volume increase of ~2% to 154.1mt (volume mix was weak). Cash cost (ex-OBR) was flat YoY at INR1,001/t. Adj. EBITDA (ex-OBR) increased 44% YoY to ~INR79b, driven by higher realization and flattish cost. There is a change in accounting of provisions from gross to net basis. The provisions have decreased with corresponding decrease in revenue and other income. 1QFY19 and 2QFY19 financials have also been restated, which boosted EBITDA, but with no impact on PAT. PAT increased 52% YoY to INR45.6b, beating our est. of INR35.7b, driven by better-than-expected FSA realization and lower cost.

We believe that on a long-term basis, continued restriction on evacuation will limit the overall potential of the company. However, given the strong cash flows, we expect the company to declare strong dividends going forward. At the CMP of Rs 223, we build in 10% dividend yield and believe that the stock is...