Coal India extends gain post Q4 results; stock hits three-month high

The stock rallied 5% to Rs 303 in intra-day trade on Thursday, extending its Wednesday's 2.3% gain on the BSE

Coal India rallied 5% to Rs 303 in intra-day trade on Thursday, extending its Wednesday’s 2.3% gain on the BSE, after the company reported higher than expected 4.5% year on year growth in consolidated net sales at Rs 251 billion in March 2018 quarter (Q4FY18).

The stock hit a three-month high in early morning deal today, was less than 5% away from its 52-week high of Rs 317 touched on February 27, 2018 in intra-day trade.

Coal India’s consolidated net profit however more than halved to Rs 12.94 billion from Rs 27.20 billion mainly on account of one-offs related to employee provisions during the quarter.

Employee benefit expenses was increased 80% year on year to Rs 167 billion, which includes a provision of Rs 80.31 billion towards pay revision of the executive employees and increase in gratuity ceiling.

“Adjusted for the one-offs, operating profit would jump to Rs 82 billion from Rs 2 billion reported in Q4. Adjusted EBIDTA/ton stood at Rs519/ton, more than double on yoy and qoq basis. The company has also managed to reduce its receivables drastically during the year,” IIFL Wealth Management said in result update.

Fuel supply agreement (FSA) realisations improved 15.4% qoq as the company had taken price hikes in January ’18 and also on account of superior grades. The brokerage firm believes the impact of grade slippages is over and FY19 would witness the complete impact of price hikes and additional charges levied by the company during FY18.

The company has guided for production and sales volume of 630 mn tons in FY19 from 567.4 mn tons of production and 580.3 mn tons of sales in FY18.

“We believe most of the negatives are already built into the price. Evacuation charges coupled with price hikes would add Rs 89 billion to the company’s topline. This is in addition to the volume growth expected during the year. Employee costs would also be lower on a yoy basis as the company will not have any on-offs and prior period items (Rs 80 billion). We believe a combination of the above would lead to operating profit more than doubling on a yoy basis,” the brokerage firm said in a note. It upgrades the stock to ‘Buy’ with a revised price target of Rs 369.

At 12:17 pm; Coal India was trading 2% higher at Rs 295 on the BSE, as compared to 0.46% rise in the S&P BSE Sensex. The trading volumes on the counter jumped 1.5 times with a combined around 6 million shares changed hands on the BSE and NSE so far.