ICICI Securities: Coal India Logs One-Off Quarter Due To Operating Deleverage; Improvement Already Underway
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ICICI Securities Report
Coal India Ltd.’s Q1 FY21 profit after tax declined 55.1% YoY to Rs 20.8 billion mainly due to lower revenues and operating deleverage on the back of higher contractual expenses due to higher over burden removal (OBR) (preparing for higher production in the coming months), all of which is expected to normalise in the coming quarters.
Other income was lower as cash balance declined with mounting receivables.
Revenues fell 25.9% YoY to Rs 184.9 billion with decline in both offtake (by 21.5% YoY) and average realisation (by 6.7% YoY) as well as inventory liquidation.
We remain positive on the stock since July-August 2020 witnessed significant growth in production and offtake, and better e-auction premiums.
Expenses, booked as normal, are expected to improve operating leverage from Q2 FY21.
Also, liquidation of dues helped by the Power Finance Corporation / Rural Electrification Corporation scheme is expected to restore cash balance to pre-Covid-19 levels.
Although our volume estimate for FY21E remains at 580 million tonne, Coal India is confident of exceeding it.
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