Coal India Ltd. share price target

Coal India’s (CIL) Q1FY24 EPS of INR 12.9 was 24% and 21% ahead of our and consensus’ estimates, respectively. Key points: 1) FSA realisation was aided by higher supplies to non-regulated sector (NRS); 2) e-auction premium over FSA prices was 144%; and 3) provision of INR 8bn towards wage revision was recognised in Q1FY24.

We expect e-auction volumes to rise which could partially compensate for the falling e-auction premiums. We maintain our BUY rating on the stock.

Coal India’s (CIL) board of directors has approved a price hike of 8% on higher- grade coal (G2-G10) w.e.f. 31st May’23, translating into a benefit of Rs27.03bn for the remaining part of FY24. Despite the high-grade coal production being limited to subsidiaries such as BCCL and CCL, we believe the price hike is likely to partially allay investor concerns about the adverse impact of the recent wage hike on profitability.

We hosted Coal India’s (CIL) management for a roadshow in Mumbai (on 17th May’23). Key points: 1) volume growth is likely to be the key growth driver; 2) e-auction volumes are likely to surpass 100mnte in FY24 (FY23: 62mnte) though realisation may come off; 3) the major provisions pertaining to staff cost have been taken in FY23 itself.