​​​
  1. Why this analyst has ‘Buy’ rating on Coal India despite weak Q1

Why this analyst has ‘Buy’ rating on Coal India despite weak Q1

Coal India Ltd announced its results on Tuesday for the quarter ended June 30, 2016, wher it posted 14.78 per cent fall in consolidated net profit at Rs 3,065.28 crore against Rs 3,596.93 crore in the same period a year ago.

By: | Published: September 14, 2016 4:14 PM
"We are in touch with the South African Government. We have framework issue...We are sorting out the framework issue," Coal India Chairman-cum-Managing-Director S Bhattacharya told.  (Image Source: Reuters) Coal India shares closed 1.97 per cent down at Rs 324.20 on Wednesday post their Q1 results.. (Image Source: Reuters)

Coal India Ltd announced its results on Tuesday for the quarter ended June 30, 2016, wher it posted 14.78 per cent fall in consolidated net profit at Rs 3,065.28 crore against Rs 3,596.93 crore in the same period a year ago. The consolidated net sales of the company stood at Rs 17,796.05 crore, declining by 6.1 per cent. Its consolidated sales was at Rs 18955.75 crore during the same period last year. The share price of the public sector company closed 1.97 per cent down at Rs 324.20.

Analyst Religare Institutional research in a research note said although the company has reported a weak Q1 but further downsides are capped. It has maintained a ‘Buy’ rating with target pice of Rs 350.

Here are its key takeaways about Coal India’s first quarter results

1. Coal India (CIL) missed estimates as it has posted below-expected Q1FY17 profit after tax of Rs 3,070 cr, missing estimates by 14 per cent. The key negative surprise was a 4.4 per cent YoY decline in FSA realisations which occurred despite a 6.3 per cent price hike by CIL in May and was likely caused by a poorer grade mix. With oversupply being addressed and e-auction prices inching up on the back of higher prices of imported coal and petcoke, we do not expect further business deterioration.

2. On 3 per cent year-on-year(YoY) dispatch growth, CIL reported a 12 per cent YoY drop in Q1 EBITDA to Rs 42.5bn (incl. other operating income). Adjusting for overburden removal (OBR) expenses, EBITDA declined 19% vs. the 1.5% growth seen in Q1FY16. The negative surprise for the quarter was a 4.4% YoY decline in FSA realisations, especially after the company had announced a price hike of 6.3% on 28 May. We believe a poorer grade mix was the reason behind the fall in FSA realisations. FSA volumes grew 1.7% YoY to 108mt.

3. Coal e-auction prices were down 28 per cent Year-on-Year/4.7% QoQ, pressurised by the increasing volumes at 20mt (+28% YoY). Consumption of stores was the only major cost that declined, with a drop of 6% YoY (amounting to 10% vs. 13% of total cost per tonne in Q4). Contractual expenses increased by 12.5% YoY (amounting to 20% vs. 22.6% of total cost per tonne in Q4), implying that incremental production of coal and overburden charges were from contractual workers. Employee costs increased 2.1% YoY.

4. With CIL addressing oversupply by trimming production (output up only 1.3% over Apr-Aug’16) and e-auction prices moving up marginally led by higher international coal and petcoke prices, the brokerage house sees limited scope for further business deterioration. In addition, CIL’s dividend yield of 5.4% lowers the downside risks.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

  1. No Comments.

Go to Top