May 20, 2013 08:36 AM IST | Source:

Here's what to expect from Coal India in Q4

Coal India is expected to report around Rs 6400crore profit on Rs 20600 crore revenues in Q4.

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Moneycontrol Bureau

Higher wage bills and around Rs 11/litre hike in diesel price is likely to impact Coal India’s (CIL) March quarter numbers, which are to be announced on Monday.

The state firm is consistently facing margin pressures after it revised salary structure in January 2012 and during the quarter under preview, the firm revised dearness allowance and also hiked its contractual workers pay, taking expense higher. Salary alone constitutes 50 percent of its total expenditure.

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CIL has not been able to pass on costs either due to political pressures or volatile market condition. The company is also in the process of raising costs once the latest amendments in the fuel supply agreement (FSA) is accepted by customers. Analysts say, company will grow in ensuing quarters if the company manages to hike coal price at-least by 4 percent/tonne.

Analysts on an average expect CIL to post Rs 6,400 crore profit on Rs 20600 crore sales for the quarter. CIL, which supplies almost 80 per cent of India's coal requirement is a debt-free company, generating 33 per cent return on equity, sitting on cash and cash equivalent of about Rs 65,000 crore, say analysts.

Meanwhile, these are key issues to watch out for in Q4 from the company.

*Production volume, guidance and realization trend in Q4

*Clarity on the much talked about price pooling mechanism via which CIL can distribute higher cost of imported coal among power producers

This is what brokerages expect of CIL in Q4

Motilal Oswal expects CIL’s Q4 profit to grow 6 percent year-on-year to Rs 6404 crore. Sales too will go up 6.2 percent YoY to Rs 20632 crore on improved volumes

Antique Broking estimated 14 percent YoY growth in earnings due to higher rake availability from 192 rakes/day to 213 rakes/day YoY

Morgan Stanley expects CIL to reports Rs 5316.6 crore profit in Q4, up 34 percent YoY. Sales will marginally decline to Rs 19153 crore, it says

Stock watch

The stock has corrected from around Rs 306.45 to Rs 297 per share in one year. Key things to watch would be clarity on FSAs, volume growth and company’s ability to raise price.

The government will in September this year sell 10 percent stake in the firm whose stock is considered one of the best performers amongst state-run companies.The divestment process is likely to fetch around Rs 20000 crore to the government..

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