Coal India is one of the largest miners and processors in the world. Itis crucial for India’s energy security as the country still relies heavily on burning coal to produce electricity. Coal India’s primary customers are power and steel companies. Those operating kilns also buy coal from the behemoth.
Coal India had 345 mines on April 1, 2021, of which 151 were underground, 172 open cast, and 22 mixed mines. The company has extensive mining capabilities and advanced open cast mining technology. In the fiscal year 2022, Coal India CIL produced 623 million tonnes of coal while offtake was 662 MT.During the recent summer of 2022, the demand for coal peaked, and many areas in the country faced blackouts as the company was unable to meet the demand.
This was despite higher production and a higher offtake. Moreover, the war between Ukraine and Russia in Europe also led to higher coal prices, making imports less feasible for power companies. At such a time, the Coal India share saw heavy buying, though the stock price has come down lately. As of June 2022, the stock has gained 14% in the calendar year 2022. Analysts believe it will likely go higher.
For the March quarter, Coal India reported consolidated revenue of Rs. 32,707 crore, up to 22% YoYand 15%QoQ, which was higher than ICICIdirect’s estimates of Rs. 31,080 crore. Consolidated earnings before interest, taxes, depreciation, and amortisationfor the quarter were up 41% YoY and 33% QoQ while the EBITDA margin for the quarter also improved to 27.8% compared to 24.1% in Q4FY21 and 24% in Q3FY22.
EBITDA/tonne for the quarter was at Rs. 504/tonne compared to Rs. 390/tonne in Q4FY21 and Rs. 393/tonne in Q3FY22 was higher than ICICIdirect’s estimate of Rs. 475/tonne. Net profits for the quarter shot up 46% YoY and 47% QoQ to Rs. 6,715 crore, also higher than the estimates.
Overall, earning performance of the company was strong, and analysts at ICICIdirect also acknowledge this fact. Over FY22-24, they now expect Coal India’s consolidated revenue to grow at a compound annual growth rate of 3.2%,while consolidated EBITDA and consolidated net profits are expected to register a CAGR of 6.3% and 5.6%, respectively. They also expect the company’s consolidated EBITDA margins to hover at 24% for the next couple of years.
ICICIdirect has a BUY rating on the Coal India share price with a target of Rs. 225, valued at 4.5 times FY24 expected EV/EBITDA.
For a disclaimer and detailed report, click here: