Coal India Ltd. share price target

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...

8 January 2019 reached a point where growth of dispatches will suffer not only in FY19E, but also in FY20E. COAL builds inventories during 2H of any financial year in order to meet demand in the 1H of the next financial year, when production is usually lower due to seasonally high heat followed by monsoons. Various government agencies and COALs top management need to work on a war footing to address these issues, else production growth will suffer. Since inventories at power plants remain low, the restocking demand will continue to drive higher demand in FY20E as well. Therefore, we need to reduce E-auction volumes by 3% to 79mt in FY19E and by 25% to 69mt in FY20E. A scarcity of coal for non-power will ensure that E-auction prices remain high. EBITDA estimates by 5%/6% to INR242/274b for FY19E/20E on combined impact of reduction in volumes and increase in E-auction prices as discussed above.

Rich dividend yield on depressed earnings: Impacted by grade slippages, wage revision and elevated capex, COAL's FCFE grew at a tepid CAGR of 2.5% over FY14-FY18 less than half of growth in volumes. We expect FCFE growth to languish between 2.0-2.2% in FY19e-FY21e due to stable earnings...

A reversal in government policy (to substantially align prices with global prices and to invest surpluses profitably) is a huge (but unlikely) risk to our SELL call. COAL Indias business leaves barely enough cash flow, after paying for capex (with back ended benefits) & dividends. Our unflattering view on COAL derives from the grim reality that it serves the mission to supply coal at low prices to Indias power sector, with little regard for profits (let alone maximization).

Coal India (CIL) reported a mixed set of Q2FY19 numbers. Topline was above our estimates, EBITDA came in lower than our estimates while PAT was broadly in line with our estimates. Sales volumes came in at 137.3 MT, up 4% YoY. FSA volumes during the quarter came in at 116.8 MT, up 12% YoY, down 10% QoQ. FSA realisations were at | 1308/tonne (up 7% YoY, flattish QoQ; our estimate: | 1325/tonne). Eauction volume came in lower at 17.7 MT, down 24% YoY, 9% QoQ. The e-auction realisations came in at | 2592/tonne, up 61% YoY, 8% QoQ broadly in line with our estimate of | 2519/tonne...

Coal India Ltd Q2FY19 results Comment Revenue fell by 8.34% to Rs. 20712.71 Cr in Q2FY19 when compared to the previous quarter. On the other hand, it rose by 18.5% when compared with Q2FY18.

12 November 2018 COAL is supplying higher share of production on a priority basis to the less- higher FSA realization (up ~7% YoY to INR1,308/t v/s our estimate of INR1,325/t), (2) higher e-auction realization (up 61% YoY/8% QoQ to INR2,592/t v/s our estimate of INR2,400/t) and (3) increased volumes (up ~6% to 137.3mt). lower-than-estimated e-auction volume and FSA realization and (3) higher cost in stock adjustment. Adj. PAT of INR30.8b came in lower than our estimate due to higher OBR provision, marginal revenue miss and higher cost of stock adjustment, partly offset by higher other income. However, COAL is benefitting from higher e-auction prices and operating leverage. We lower our e-auction volume estimate by 20mt to 82mt, raise our e-auction price estimate by INR800/t to INR2,500/t and increase our adj. We expect PAT CAGR (FY18-20) of ~27%, led by the full benefit of price hikes and evacuation charges, higher volumes and operating leverage.