5 September 2020
1QFY21 Results Update | Sector: Utilities
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
815.9 / 11.4
218 / 119
TP: INR190 (+44%)
Negative operating leverage kicks in
Valuations attractive; Dividend yield of ~10%
Coal India’s (COAL) 1QFY21 results highlight the impact of lower volumes/
e-auction realizations amid subdued thermal power demand. Adj. EBITDA
(ex-OBR) was down 63% YoY.
Muted power demand has impacted off-take and e-auction realizations.
However, we expect Coal India to tide over the situation given its large cash
position (Net cash: ~INR230b). Maintain
with target price of
INR190/share based on 3.5x Sep’21 EV/EBITDA.
EBITDA declines 63% YoY on lower volumes and e-auction realizations
1QFY21 Adj. EBITDA (ex-OBR) was down 63% YoY to INR28b (in-line) on
account of lower off-take/e-auction realizations. While FSA realization at
INR1,359/t was below our est. INR1,400/t, it was offset by higher mix of e-
auction volumes at 15.9mt (v/s est. 13.1mt).
Revenue declined 26% YoY to ~INR185b (v/s est. INR194b). Overall off-take
was down 22% YoY to 120.4mt given the lower power demand. Production
was down 12% YoY to 121mt. Cash cost (ex-OBR) rose 15% YoY to
FSA volumes declined 22% YoY to 102.2mt (v/s est. 103.5mt); FSA
realization was down 1% YoY to INR1,359/t (v/s est. INR1,400/t).
E-auction volumes declined 17% YoY to 15.9mt (v/s est. 13.1mt);
E-auction realization was down 26% YoY to INR1,598/t (v/s est. INR1,600/t).
The company reported write-backs of INR2.5b on OBR (v/s est. INR9.6b
expense) amidst strong focus and higher stripping ratio. This led to a beat
on our reported PAT numbers. Overall, PAT was down 55% YoY to INR20.8b
(v/s est. INR13.4b).
Management commentary: Receivables situation slowly improving
COAL’s management has noted that the company’s receivables have
increased to INR230b in 1QFY21 from INR178b at end-FY20. However, these
receivables have decreased to INR210b at end-Aug’20. COAL expects the
situation on receivables to improve further and normalize from Oct’20.
COAL is focusing on import substitution and targeting ~100mt under the
same. It is planning ~75mt of coal for the Non-Regulated Sector (NRS) and
would seek to provide better quality of coal.
Valuations attractive; Maintain Buy
Volumes and e-auction realizations have been under pressure on decline in
power demand and significant stocks at both mines and power plants.
However, power demand is showing signs of improvement and we expect
volumes to recover in 2HFY21.
Furthermore, we expect Coal India to tide over the current situation given
its large cash position (Net cash: ~INR230b). The stock trades attractively at
~1.6x FY22E EV/adj. EBITDA (v/s historical average of 7x), P/E of 5x (v/s
average of ~13x) and offers a dividend yield of ~10%. Maintain
target price of INR190/share.
Financials & Valuations (INR b)
2020 2021E 2022E
960.8 891.2 1,052.2
219.2 150.9 245.1
167.0 110.1 177.1
EBITDA Margin (%)
Cons. Adj. EPS (INR)
EPS Gr. (%)
Div. Yield (%)
FCF Yield (%)
Shareholding pattern (%)
FII Includes depository receipts
Aniket Mittal – Research Analyst
13 February 2020
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.