MOSL: COAL INDIA (Buy)-Better grades and lower CoP drive outperformance
Coal India: Better grades and lower CoP drive outperformance; Valuations attractive; dividend yield of 7-8%; Maintain Buy
(COAL IN, Mkt Cap USD22.3b, CMP INR253, TP INR307, 22% Upside, Buy)
- Revenue grew 6% YoY to ~INR285b (our estimate: INR283b) in 4QFY19, led by an increase of (a) ~4% YoY in FSA realization (INR1,460/t v/s our estimate of INR1,388), (b) 30% in e-auction realization (INR2,754/t v/s our estimate of INR2,619) and (c) ~2% in volumes (163.1mt; volume mix was weak). FSA realization was supported by better grade management and mine mix.
- Cash cost (ex-OBR) increased 5% YoY to INR1,110/t due to a higher wage bill (includes INR6.5b for prior-period pension provision and INR3-4b for bonus provisions). Excluding the wage bill, cash cost was down ~4% YoY.
- EBITDA (ex-OBR) increased 4% YoY to ~INR104b, driven by higher realization and volumes, partly offset by the higher wage bill.
Coal India is engaged in the identification, exploration, and production of coal in India. Co. offers coking coal primarily for use in steel making and metallurgical industries, and for hard coke manufacturing; semi coking coal for use as blend-able coal in steel making, merchant coke manufacturing, and other metallurgical industries; NLW coking coal for use in power utilities and non-core sector consumers; non-coking coal for use as thermal grade coal for power generation, as well as for cement, fertilizer, glass, ceramic, paper, chemical and brick manufacturing, and for other heating applications.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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