Coal India Ltd. share price target

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...

1QFY20 revenue grew 4% YoY to ~INR249b (v/s est. INR237b) led by FSA realization increase of ~6% to INR1,370/t (v/s est. INR1,310/t), which was partly offset by lower e-auction realizations at INR2,155 (-10% YoY/-22% QoQ). Volumes were flat YoY at ~153mt (in-line). The increase in FSA realization was due to hike in coking coal prices at BCCL & CCL along with higher sales to the non-Power sector (~4mt higher YoY). Cash cost (ex-OBR) declined 1% YoY to INR1,135/t, despite higher wage bill. The company's wage bill was impacted (~INR2.7b) on an actuarial valuation...

The management has set a volume guidance of 660 million tonnes (MT) for FY20E, implying volume growth of 8.7 (CIL's FY19 production volume at 606.9 MT). Majority of CIL's volume growth is likely to be...

According to COAL, India will continue depending on coal to secure its energy needs over the next 10-20 years, particularly considering the country's low per capita electricity consumption and the government???s focus on assuring '24x7' power supply.

Offtake to grow at CAGR of 3.4% in FY19-21E For Q4FY19, FSA sales volumes came in at 142.4 MT (up 12.7% YoY, 4.9% QoQ). FSA realisation during the quarter was at | 1460/tonne (vs. | 1403/tonne in Q4FY18), higher than our estimate of | 1350/tonne. E-auction volumes were at 16.7 MT, up 13.7% QoQ, marginally higher than our estimate of 16.3 MT. E-auction realisations were down 3.3% QoQ to | 2754/tonne. For FY19, CIL reported a sales volume of 608.1 MT, up 4.8% YoY. Going forward, we model CIL's offtake volume of 625 MT for FY20E and...