Motilal Oswal's research report on Coal India
COAL reported yet another quarter with in line revenue. Net sales grew 24% YoY and 18% QoQ to INR352b in 3QFY23. The YoY sales growth was driven by a 23% growth in blended ASP. ASP grew YoY across all the categories and total dispatch volumes registered a growth of 1.2% YoY. Dispatches were up 14% QoQ and 1.2% YoY, while blended ASP was up 4% QoQ and 23% YoY at INR1,845/t. E-auction ASP was up 160% YoY to INR5,047/t (down 17% QoQ; e-auction premium had touched its life-time high in 2QFY23). E-auction premium cooled off to 241% from an all-time high of 329% in the previous quarter. Adjusted EBITDA (net of OBR) grew 52% YoY and 40% QoQ after a strong 178% YoY growth in 1QFY23 and 100% YoY growth in 2QFY23 – the highest ever third quarter EBITDA for COAL. APAT grew 69% YoY and 28% QoQ to INR77b in 3QFY23. The company increased its OBR removal by 19.2% to make future coal excavation easier. The OBR as on December had surpassed its satisfaction target and stood at 100.8%. We believe the strength in the e-auction premiums as well as strong dispatches would help the growth momentum.
Outlook
We maintain our e-auction premium estimate for FY23/24 at 231%/81% respectively. We retain our BUY rating for TP to INR 275, valuing the stock at 5x FY24EV/EBTIDA. COAL continues to be our top pick in the metals and mining sector. The stock at CMP of INR225 trades at an inexpensive valuation of 2.6x/4x on FY23/24 EV/EBTIDA.
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