Target: ₹281
CMP: ₹219.80
Coal India (COAL IN) reported in-line EBITDA ex OBR at ₹11,230 crore (Centrum Estimates: ₹11,320 crore), up 52 per cent y-o-y/up 40 per cent q-o-q. This is due to higher FSA sales volume (up 8 per cent y-o-y) and realisation (FSA up 8 per cent y-o-y & e-auction up 159 per cent y-o-y).
The e-auction price have likely peaked in Q2 on account of decline in international prices and expected to decline further sequentially. The employee cost increased by 16 per cent y-o-y to ₹11,500 crore. The wage negotiation concluded in Jan-23 hiked by 19 per cent effective from July 2021. The impact is likely to account in Q4FY23.
Coal India announced ₹5.25/sh interim dividend during the quarter. We cut FY23 & FY24 EBITDA by 10 per cent and 5 per cent respectively to factor lower e-auction volume and higher employee cost.
We also increase dividend estimate for FY23 to ₹25/share (earlier ₹20/share). Any increase in FSA price price hike would be key trigger for the stock. Coal India is available at 6.4x FY25 P/E and 2.9x FY25 EV/EBITDA.
We maintain Buy rating with target price to ₹281 (earlier ₹304), valuing Coal India at 4.5x FY24/FY25 average EV/EBITDA.