MOSL: COAL INDIA (Buy)-Profit decreases on lower off take
COAL INDIA: Profit decreases on lower offtake
(COAL IN, Mkt Cap USD15.5b, CMP INR179, TP INR258, 44% Upside, Buy)
Valuations attractive; dividend yield of ~10%
- Coal India's (COAL) results highlight the impact of lower volume offtake amid subdued thermal power demand. FSA realizations though were higher YoY on account of increased share to non-power and better grade.
- Production at the company's mines has started to ramp up post heavy monsoon, and we expect offtake to improve as power demand recovers. The stock trades attractively at ~3x FY21E EV/adj. EBITDA and offers a dividend yield of ~10%. Maintain Buy with a target price of INR258/sh.
EBITDA declines as offtake decreases 8% YoY
- COAL's 3QFY20 adj. EBITDA (ex-OBR) declined 22% YoY to ~INR62b (our estimate: ~INR57b) due to lower offtake. The beat on our estimates was driven better-than-expected realizations. Other income rose 21% YoY to INR14.1b (our estimate: INR8.3b). PBT fell 24% YoY to INR53.3b. Adj. PAT declined 14% YoY to INR39.2b (our est.: INR33.7b) given lower tax rate.
- Revenue declined 7% YoY to ~INR232b (our estimate: INR225b) due to a decline in sales volumes. Volumes were down 8% YoY at ~142mt (in-line).
- FSA: FSA volumes declined 6% YoY to 127.7mt. However, realization was up 6% YoY at INR1,411/t due to higher non-power segment sales and better grade realized.
- E-auction: E-auction volumes declined 33% YoY to 9.8mt. Realizations, too, were down 8% YoY at INR2,623/t.
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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