Sharekhan's research report on Coal India
Consolidated Q3FY23 operating profit of Rs. 10,389 crore (up 52% y-o-y) lagged our estimate as margins were hit by higher contractual expenses (up 21%/42% y-o-y/q-o-q) and lower blended realisations. PAT of Rs. 7,756 crore (up 70% y-o-y) was 3.6% below estimates led by miss in margin, higher depreciation and tax rate partially offset by higher other income. FSA/E-auction realisation of Rs. 1,482/Rs. 5,047 per tonne, missed our estimate by 4%/5%. E-Auction premium came at 241% versus 329% in Q2FY23. Coal offtake volume at 176 million tonnes (up 1.2% y-o-y; up 13.8% q-o-q) was in-line provisional numbers declared by company. FSA volumes rose by 9% y-o-y to 158 mt but the same was offset by a steep 44% y-o-y decline in e-Auction volumes to 15 mt. We thus expect a strong 20% PAT CAGR over FY22-25E. A likely FSA realisation hike could improve earnings growth outlook. Potential stake sale in Bharat Coking Coal Limited (BCCL) and a subsequent listing would unlock value.
Outlook
The stock trades at an attractive valuation of 5x/4.5x its FY24E/FY25E EPS (close to trough valuation) and offers a high dividend yield of 12%. Hence, we maintain a Buy with an unchanged PT of Rs. 280.
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