A basket of coal and a pair of sandals sit on the ground at a coal market in Mumbai, India (Photographer: Dhiraj Singh/Bloomberg)  

Coal India Clocks 16% Production Growth In May; Misses Target

Coal India Ltd. reported robust production growth last month boosted by low base effect but fell slightly short of the target.

The world’s largest coal producer reported 16 percent jump in output at 47.1 million tonnes as against 40.74 MT clocked in May 2017, according to a company filing to the exchanges last week.

However, the company missed its production target by nearly 8 percent. All subsidiaries, except Northern Coalfields Ltd., reported a shortfall in production. This is for the second consecutive month in this calendar year that the company has missed targets.

Offtake Increases

Coal India’s offtake, or sale, in May was up 14 percent year-on-year at 52.9 MT as compared to 46.4 MT in the year-ago period, which its management attributed to higher demand from the power sector. But it was again short of the target by 9 percent. The offtake shortfall was seen across all subsidiaries.

Muted Q4

Coal India’s net profit fell 52.3 percent to Rs 1,295 crore as compared to the same quarter last year. That fell short of the the Rs 4,341 crore estimated by analysts tracked by Bloomberg. The bottom line was hit by an 80 percent rise in staff benefit cost to Rs 16,654 crore as the company provisioned for pay revision of executive employees.

Brokerage View

Nomura

  • Forecasts Coal India’s production and offtake at 611 MT and 622mt; implying YoY growth of 8 percent and 7 percent, respectively.
  • Maintain ‘Neutral’ rating, with target price of Rs 332.

Morgan Stanley

  • Upgraded stock rating to ‘Equal weight’ from ‘In-line’; with a target price of Rs 306.
  • Lower capital expenditure guidance gives room for more dividend, guidance of 8.6 percent volume growth over FY19 and strength in e-auction prices improves outlook.
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