Coal India, the world's largest coal miner, reported its Q4FY23 earnings on May 07, missing the Street estimates. The coal miner's profitability was impacted due to the sharp rise in operating expenses.
The company reported a 17.7% YoY drop in its consolidated net profit to ₹5,528 crore. It had posted a net profit of ₹6,715 crore in Q4 FY22 and ₹7,719 crore in Q3 FY23. While the other income saw a significant surge of 30% YoY to ₹2,282 crore.
Coal India posted the highest-ever quarterly net sales at ₹38,152 crore in Q4FY23, a jump of 16.64% YoY from ₹32,709 crore in the year-ago period. However, the total expenses came in higher at ₹31,254 crore in Q4, an increase of 33.39% YoY and 26.12% QoQ, with employee wage expenses surging by 57% YoY to ₹5,870 crore in the March Quarter.
The company said that a provision of ₹5,870.16 crore has been made in the reporting quarter for the revision of salaries of non-executive workers, as their wages are revised every five years, and the hike is due from July 2021.
The non-executive workforce accounts for 94% of the company’s total workforce of 248,000 employees, as per media reports. In 2017, Coal India signed a wage agreement with worker unions proposing a 20% hike in salaries for five years.
The company could have achieved its highest-ever profit in the March quarter if it had not made provisions towards wages in the National Coal Wage Agreement (NCWA)-XI.
However, it recorded its best-ever consolidated net profit of ₹28,125 crore for the full financial year 2022–23, a massive surge of 62% over the previous fiscal year net profit which stood at ₹17,378 crore.
This strong growth was driven by higher sales volume and increased premiums in the e-auction, which bolstered the company's profitability. Its total revenue from operations also surged to an all-time high of ₹1,27,627 crore in FY23 from ₹1,00,563 crore in FY22.
During the fourth quarter of FY23, coal production rose by 7.3% YoY to 224 million tonnes (MT) from 209 MT in the corresponding quarter of FY22. The coal offtake during the quarter also went up by 3.7% YoY to 187 MT from 180 MT in Q4FY22.
In the March 2023 quarter, Coal India’s total supply of coal through the fuel supply agreements (FSA) came in at 167.45 million tonnes (MT), up from 150.11 MT in a similar period. The average realisation per tonne from the FSA sales in Q4 was ₹1,550 per tonne, compared to ₹1,474 per tonne in Q4 FY22.
Higher volume sale by 17.34 MTs and better average realization under FSA resulted in a net impact of around Rs.3,879 crores in Q4.
Though e-auction sales at 16.40 MT were lower by 41% in volume terms in Q4 compared to 27.65 MT of a similar quarter in FY22, higher premiums under the e-window helped CIL in cranking up e-auction sales by Rs. 690 crore.
The realisation through e-auction sales during Q4 FY23 came in at ₹4,525 per tonne, compared to ₹2,434 per tonne in Q4 FY22. The jump was Rs. 2,092 per tonne, or 86%.
In terms of financial ratios, Coal India has one of the highest Return on Equity among Nifty 50 companies. The company delivered an RoE of 88.60% and an ROcE of 66.35% in the year ending March 31, 2023.
Domestic brokerage firms have maintained their positive outlook on the stock post Q4 performance. Sharekhan retained its 'buy' rating on the stock with a target price of ₹270 apiece, citing an attractive valuation. This target price indicates an upside of 14.40% from the stock's current trading price of ₹236 apiece.
"CIL’s valuation of 6.3x/5.6x FY24E/FY25E EPS is close to trough level, and the stock offers a high dividend yield of 10%. The company’s board has given in-principal approval to divest a 25% stake in Bharat Coking Coal Limited (BCCL), and a stake sale along with a potential listing could help unlock value," said the brokerage firm.
Similarly, Axis Securities maintained its 'buy' recommendation on Coal India with a target price of ₹275 apiece, which hints towards an upside of 16.52%.
22 analysts polled by MintGenie on average have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.