Shares of Coal India were volatile in intraday trade on May 26, falling more than a percent and then rising almost 3 percent, a day after the company announced the March quarter result. The stock finally closed with a gain of 1.41 percent at ₹183.15 on BSE.
The coal miner's consolidated net profits for Q4FY22 stood at ₹6,692.94 crore, up 45.91 percent year-on-year (YoY) from ₹4,586.78 crore in the same quarter last year.
Revenue from operations for the March quarter came at ₹32,706.77 crore, up 22.5 percent YoY from ₹26,700.14 crore in the same quarter of last year. The company's adjusted EBITDA (excluding non-cash stripping activity adjustment expense) rose as much as 56 percent year-on-year to ₹12,468 crore in Q4.
Also, the board of directors of the company announced a ₹3 per share dividend.
Analysts and brokerages are of the view that Coal India's Q4FY22 numbers were broadly in-line with expectations with some weak points.
"Coal India has reported excellent earnings in Q4FY22 with all-time high figures for quarterly revenue, EBITDA, EBITDA/te and PAT," said brokerage firm ICICI Securities.
"Coal India's strong performance was despite severe cost pressures; the recent cut in diesel prices will ease fuel costs in Q1FY23. Coal India now has a much healthier balance sheet with debtors at ₹11,400 crore against ₹19,600 crore at FY21-end and cash and liquid investments increased to ₹36,500 crore against ₹20,900 crore at FY21-end," ICICI Securities underscored.
Motilal Oswal Financial Services said Coal India reported a largely in line Q4FY22, but e-auction premiums, the mainstay of its profitability, disappointed both in terms of volume and premium.
"Cost control, especially in contractual costs, resulted in a marginal beat on adjusted EBITDA in the March quarter," Motilal Oswal pointed out.
Motilal Oswal highlighted that the growth in the company's net sales was driven by a 4 percent growth in dispatches, 8 percent higher FSA (fuel supply agreement) prices, and a 25 percent growth in e-auction prices.
"E-auction premium in Q4FY22 was 57 percent against our assumption of 90 percent. As a result, net sales were 7 percent lower than our estimate," said the brokerage firm.
Motilal Oswal said the EBITDA beat, despite a miss on revenue, was largely due to lower material costs and contractual expenses. The lower PAT growth in FY22 was attributed to its highest ever quarterly provisioning of OBR.
What should you do with the stock?
Most brokerage firms say yes as they are largely positive about the stock of Coal India. As reported by CNBC-TV18, global brokerage firm Credit Suisse has maintained an 'outperform' call and raised the target price to ₹250 from ₹225. The brokerage believes the company's volume growth and higher unit realisations should aid its profitability.
Besides, as per CNBC-TV18, BofAML has a 'buy' rating on Coal India with a target price of ₹218. Citi has a 'neutral' rating on Coal India, with a target price of ₹180 and it said that with ESG concerns, significant re-rating might not be easy.
Among the domestic brokerages, Motilal Oswal has a 'buy' call on the stock with a target price of ₹230. It said Coal India had registered strong e-auction premium from Nov’21 to Mar’22. However, it lagged volumes in Apr’22, given the pressure to increase supplies to the Power sector.
"With the onset of the monsoon, demand for coal from the power sector is likely to reduce. However, demand from the non-power sector is unlikely to diminish, given the strong global prices. This should result in higher volumes for the non-regulatory sector (NRS) in the coming months," Motilal Oswal said.
ICICI Securities has maintained a 'buy' call on the stock, increasing the target price to ₹258 from ₹234.
"Coal India is currently trading at 5.7 times P/E and 2.6 times EV/EBITDA on an FY24E basis with 35.6 percent RoE. We expect dividend payout to remain high, leading to an 11 percent yield at the current market price, despite heavy capex," ICICI Securities said.
Disclaimer: The views and recommendations made above are those of the broking firms and not of MintGenie.