Hold Coal India; target of Rs 150: ICICI Direct

ICICI Direct's research report on Coal India

Coal India (CIL) reported a mixed set of Q4FY20 numbers. EBITDA came in higher than our estimate while reported PAT came in lower than our estimate. PAT came in lower than our estimate on the back of higher-than-expected effective tax rate. CIL reported sales volumes of 164 million tonne (MT), flattish YoY. Fuel supply agreement (FSA) sales volume was at 139.2 MT (142.4 MT in Q4FY19) while FSA realisation during the quarter was at Rs 1446/tonne (Rs 1460/tonne in Q4FY19). E-auction volumes were at 21.0 MT (16.7 MT in Q4FY19) while e-auction realisations were at Rs 2106/tonne (Rs 2754/tonne in Q4FY19). Total operating income was at Rs 27568.2 crore (down 1.9% YoY), broadly in line with our estimate of Rs 28001.7 crore. EBITDA came in at Rs 6728.9 crore (down 21.9% YoY), higher than our estimate of Rs 6416.9 crore. EBITDA margin was at 24.4% (down 440 bps YoY), higher than our estimate of 22.9%. Reported EBITDA/tonne was at Rs 410/tonne, higher than our estimate of Rs 391/tonne. Effective tax rate for the quarter was at 37.9%, higher than our estimate of 25.2%. Hence, PAT was at Rs 4625.8 crore (down 16.2% YoY), lower than our estimate of 5351.6 crore.

Outlook

CIL reported a mixed performance in Q4FY20. Going forward, we model sales volume of 550 MT for FY21E and 575 MT for FY22E. Furthermore, we expect EBITDA margins to hover at ~18% over the next couple of years. We value the stock at 5x FY22E adjusted EV/EBITDA and arrive at a target price of Rs 150. We maintain our HOLD recommendation.

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