Sharekhan's research report on Coal India
Consolidated Q1FY23 PAT of Rs. 8,833 crore (2.8x y-o-y, up 32% q-o-q) was 50% above our estimates, led by a beat in blended realisations at Rs. 1,831/tonne (up 10% q-o-q), efficient cost management (employee cost down 3% y-o-y) and lower-than-expected depreciation that was offset by a higher tax rate. E-auction realisations rose 78% q-o-q to Rs. 4340/ tonne, with e-auction premium of 200% versus 65% in Q4FY22 while FSA realisation rose 3.5% y-o-y to Rs. 1443/tonne. In-line coal offtake at 178mt (up 11% y-o-y); FSA volume grew by 21% y-o-y, while e-auction volume declined by 31% y-o-y. Coal offtake is strong with a 10% y-o-y rise in FY23YTD and we have increased our FY23-24 earnings estimates by 36%/16% to factor in higher auction realisations. Potential stake sale in Bharat Coking Coal Limited (BCCL) and subsequent listing would unlock value.
Stock trades at attractive valuation of 4.8x its FY2024E EPS (close to trough valuation) and offers a high dividend yield of 12-13%. Hence, we maintain a Buy with a revised PT of Rs. 260 (reflecting rise in earnings estimates).
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