Bumper Q3 earnings fuel 2% rally in Coal India shares

Coal India: Coal India Q3 profit surges 69% YoY to Rs 7,719 crore. Revenue grows 24% to Rs 35,169 crore on strong realisation. The country's largest coal mining company recorded profit at Rs 7,719 crore for quarter ended December FY23, rising 69% YoY on the back of higher add-on over the notified price in e-auction sale of 14.65 million tonnes (MTs) coal during the quarter. Consolidated revenue grew by 24% YoY to Rs 35,169 crore for the quarter with strong realisation. The realization per tonne of coal of was Rs 5,046 under auction segment, in Q3FY23 against Rs 1,947 per tonne for comparable quarter in FY22. The jump was Rs 3,099 per tonne or 159%.

Shares of Coal India rose as much as 2 percent on February 1, reacting to bumper earnings posted by the mining giant. At 9.20am, shares of the coal major were trading 0.9 percent higher at Rs 227 on the BSE.

The state-run miner reported a consolidated net profit of Rs 7,755.55 crore for the quarter ended December, implying a growth of 70.13 percent over Rs 4,558.39 crore a year ago.

Coal India mopped up a massive consolidated profit after tax of Rs 22,597 crore in the nine months to December FY23, which is at an all-time record high. The sheer scale of profit eclipsed the highest bottomline it achieved for the entire financial year 2018-19 at Rs 17,464 crore, the company said in an exchange filing.

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Revenue from operations witnessed a near-24 percent on-year rise to Rs 35,169.33 crore. In the corresponding period last year, Coal India had reported sales of Rs 28,433.50 crore.

Sales growth was driven by a 23 percent spike in blended Average Selling Price (ASP), said Motilal Oswal Financial Services. ASP grew on-year across categories and total dispatch volumes registered a growth of 1.2 percent on-year, it added.

Dispatches were up 14 percent on-quarter and 1.2 percent on-year, while blended ASP was up 4 percent QoQ and 23 percent YoY at Rs 1,845 per tonne. E-auction ASP was up 160 percent YoY to Rs 5,047 per tonne, down 17 percent QoQ. The e-auction premium had touched its life-time high in the second quarter of FY23.

“The fourth quarter is seasonally the best period for the company and we believe that with robust demand for coal across sectors, CIL should in turn deliver yet another record quarter in 4QFY23,” said Motilal Oswal Financial Services.

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Jefferies, which has a 'hold' recommendation on Coal India with a target price of Rs 225, believes that FY23 will turn out to be a strong year for the company.

A sharp rise in e-auction realisations due to higher global coal prices has boosted the coal major’s FY23 outlook. Easing of global coal prices and higher staff costs, however, will pose headwinds in FY24. Additionally, Jefferies sees earnings per share for the company down 26 percent in FY24 after a strong FY22-23.

In the nine months to December 2022, Coal India’s output grew 16 percent at 479 MTs while supplies to coal-fired plants expanded 18.8 MTs to 432.7 MTs.