Coal India Share price today: Sharekhan maintains a Buy rating with an unchanged Price target of Rs 160

Coal India Share price today: Coal India Q3 FY2021 operating profit at Rs 5165 cr (up 4% yoy; up 29.9% qoq) was 10% above Sharekhan's estimates of Rs 4684 cr, led by better than expected EBITDA/tonne at Rs 336/tonne (up 13% qoq) on the account of efficient cost management (opex/tonne declined by 6.5% yoy due to 5% yoy drop in employee cost). However, blended realisations of Rs 1411/ tonne (down 7.4% yoy; down 3% qoq) lagged their estimates by 3.4% and coal volume offtake at 154 million tonnes (up 8.7% yoy; up 14.8% qoq) was in line with Sharekhan’s estimates. The current share price of Coal India is Rs 134 and it is trading flat today. 

Fuel supply agreement (FSA) realisations declined by 4% yoy to Rs 1354/tonne while e-auction realization was down sharply by 44.1% yoy but improved 2% qoq to Rs 1466/tonne. Coal India’s PAT, at Rs 3085 cr (down 21.4% yoy; up 4.7% qoq), was 14% below estimate as beat in operating profit was offset by higher depreciation, lower other income and higher effective tax rate of 35% (versus assumption of 25.2%).

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Coal stock at power plants declined sharply to 34 million tones, while coal inventory reached critical levels of 18 days (from 30-34 days earlier). This along with improving thermal power generation (up 8% in November 2020 to January 2021) bodes well for higher coal offtake by power plants in Q4 FY21-Q1 FY22. Additionally, e-auction premiums are also improving at 25% in Q4 FY21 so far versus 16% in 9M FY21. All the above factors would drive an earnings recovery for Coal India and the management expects current high receivables to reduce from April 2021 onwards.

Moreover, the management of Coal India is hopeful of maintaining FY20’s dividend of Rs 12/share in FY2021. Coal India is trading at an attractive valuation of 4.6x its FY2023E EPS, which is at a steep 63% discount to its historical average one-year forward P/E multiple of 12.5x) and Coal India offers a high dividend yield of 10-12%. Hence, Sharekhan maintains a Buy rating on Coal India with an unchanged Price target of Rs 160.