Hold Coal India; target of Rs 200: ICICI Direct

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ICICI Direct's research report on Coal India

Coal India (CIL) reported a steady set of operational numbers for Q3FY20 wherein topline & EBITDA came in broadly in line with our estimate. However, PAT was lower than our estimate. CIL reported sales volumes of 142 million tonne (MT) (down 8% YoY) in line with our estimate of 142 MT. FSA sales volume was at 127.7 MT (135.8 MT in Q3FY19) while FSA realisation during the quarter was at Rs 1411/tonne (Rs 1334/tonne in Q3FY19). E-auction volumes were at 9.8 MT (14.7 MT in Q3FY19) while e-auction realisations were at Rs 2623/tonne (Rs 2847/tonne in Q3FY19). Total operating income was at Rs 23190 crore, down 7% YoY (broadly in line with our estimate of Rs 23480 crore). EBITDA was at Rs 4968 crore, down 27% YoY (largely in line with our estimate of Rs 5100 crore). EBITDA/tonne was at Rs 351/tonne (our estimate of Rs 360/tonne). Ensuing PAT came in at Rs 3922 crore, down 14%YoY (below our estimate of Rs 4340.0 crore).

Outlook

CIL reported a steady operational performance for Q3FY20. Going forward, we model sales volume of 600 MT for FY20E and 625 MT for FY21E. Furthermore, we expect EBITDA margins to remain steady at ~21-22% over the next couple of years. We value the stock at 5x FY21E adjusted EV/EBITDA and arrive at a target price of Rs 200. We maintain our HOLD recommendation.

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