Target: ₹230
CMP: ₹183.15
Coal India reported a largely in line Q4-FY22, 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 Q4-FY22.
Net sales grew 22 per cent y-o-y and 15 per cent q-o-q to ₹32,700 crore in Q4-FY22. The q-o-q growth in sales was driven by a 4 per cent growth in dispatches, 8 per cent higher FSA prices, and 25 per cent growth in e-auction prices. e-auction premium in Q4-FY22 was 57 per cent against our assumption of 90 per cent. As a result, net sales were 7 per cent lower than our estimate.
Cola 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 coming months. We maintain our Buy rating, with a revised target price of ₹230/share, at 4x FY23E EV/EBITDA.