Shares of Coal India rose nearly 3 percent on February 18 after analysts pointed to likely improvement in profitability in March quarter due to surging e-auction premiums.
Brokerage firm Motilal Oswal Financial Services said that premiums on the e-auction of coal conducted by Coal India breached the 100 percent mark for the first time in 12 quarters in January-February.
“We expect profitability to recover further in March quarter,” Motilal Oswal said. The brokerage firm has retained its ‘buy’ call on the stock and raised the estimate for adjusted operating profit by 15 percent for 2022-23.
The country’s largest coal miner told analysts that a price hike is “imminent” to offset rising costs and planned capital expenditure, failing which it will have to dip into its cash balance or even raise debt.
Motilal Oswal said that Coal India needs to raise fuel supply agreement prices by 4.1 percent from December quarter levels to offset a 10 percent increase in the wage bill.
Brokerage firm Jefferies India said a price hike for linkage coal may be on the anvil as the company tends to raise prices close to wage revisions. “We assume a 10% hike in the first quarter of the next financial year of 2022-23. Higher global coal prices are also boosting e-auction realisations, although diversion of volumes to power linkages is partly eating into benefits,” Jefferies India added in a note.
In a press statement issued earlier on February 18, the coal miner said that its coal dispatch as of February 16 had already surpassed the levels seen for the entire 2020-21.
The company has supplied 575 million tonnes of coal in 2021-22 as against 574.5 million tonnes in 2020-21.
In the quarter ended December, Coal India reported strong growth in topline and bottomline. Consolidated revenues grew 20 percent on-year to Rs 28,433.5 crore led by higher e-auction prices which rose more than 30 percent.
Similarly, consolidated net profit soared 48 percent on-year to Rs 4,558 crore and comfortably beat analysts’ expectations.
At 12:31 pm, shares of Coal India were up 2.6 percent at Rs 167.4 on the National Stock Exchange.
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