Motilal Oswal's research report on Coal India
1QFY20 revenue grew 4% YoY to ~INR249b (v/s est. INR237b) led by FSA realization increase of ~6% to INR1,370/t (v/s est. INR1,310/t), which was partly offset by lower e-auction realizations at INR2,155 (-10% YoY/-22% QoQ). Volumes were flat YoY at ~153mt (in-line). The increase in FSA realization was due to hike in coking coal prices at BCCL & CCL along with higher sales to the non-Power sector (~4mt higher YoY). Cash cost (ex-OBR) declined 1% YoY to INR1,135/t, despite higher wage bill. The company's wage bill was impacted (~INR2.7b) on an actuarial valuation given the fall in interest rates. Excluding wage bill, cash cost declined ~5% YoY. Adj. EBITDA (ex-OBR) increased 15% YoY to ~INR75b driven by higher FSA realization and lower cash costs. Adjusted PAT was up 22% YoY to INR46.3b (v/s est. INR39.3b), despite strong base (1QFY19 PAT grew 60% YoY). The beat to our estimate was driven by higher FSA realizations and higher other income.
Outlook
The stock trades attractively at ~3x FY20E EV/adj. EBITDA (v/s historical average of 7x), P/E of 7-8x (v/s average of ~14x) and offers dividend yield of ~9-10%. We value the stock on 4.5x (v/s 5x earlier) FY20E EV/EBITDA at INR278/share. Maintain Buy.
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