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Financial Performance:
Coal India Ltd. posted a decent set of numbers. Revenue (up 3% YoY, down 6% QoQ) beat our estimate by 2% led by higher average selling price (down 4%/6% YoY/QoQ) which stood ahead of our estimate by 2%. Ebitda (down 14%YoY, up 52% QoQ) beat our estimates by 16%, mainly on account of lower raw material costs, which are partially offset by higher-than-expected employee and contractual expenses.
In Q4 FY23, Coal India took provision towards employee expenses of Rs 5,870 crore. Attributed profit after tax stood at Rs 7,971 crore, down 10% YoY (up 44% QoQ), beating our estimate led by higher other income and lower depreciation and amortisation expenses.
Outlook:
With robust production, coal stock at Coal india stood at 53 million tonnes. Also, the coal stock at coal-based power plants stood at 33 mt at the end of July 2023, providing adequate buffer, which could allow Coal India to divert higher coal to the non-power sector.
We reduce our Ebitda estimates for FY24/25E by 8%/3% as we reduce our e-auction prices and increase our employee expenses, partially offset by higher overall sales volumes.
Valuation and recommendation:
We continue to value the stock at 4.0 times one-year forward enterprise value/Ebitda multiple on FY25E adjusted Ebitda.
We arrive at our target price of Rs 265/share (from Rs 275/share), implying an upside of 15% from the current market price.
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