Earnings Outlook
Lower sales to dent Coal India's Jul-Sept performance
This story was originally published at 09:05 IST on 18 October 2024
Register to read our real-time news.Informist, Friday, Oct. 18, 2024
By Avishek Rakshit
KOLKATA – Coal India Ltd. is expected to report a consolidated net profit of INR 72.5 billion for the September quarter, up 6.6% on year, although its consolidated revenue is estimated to decline 4.3% on year to INR 313.7 billion, according to the average of the estimates of eight brokerage firms.
Sequentially, the company’s net profit is expected to decline 33.9% and revenue is seen down 14.0%. For the year-ago period, the company had reported a net profit of INR 68.0 billion on revenue of INR 327.8 billion, while for Apr-Jun, the net profit was nearly INR 109.6 billion on revenue of INR 364.6 billion.
The company will report its earnings for the quarter ended September on Oct. 25.
Among brokerages, Antique Stock Broking Ltd. has estimated Coal India's net profit the highest at INR 87.5 billion and Nuvama Wealth Management Ltd. the lowest at INR 54.0 billion. The highest revenue was estimated by Elara Securities (India) Pvt. Ltd. at INR 340.9 billion, while Kotak Institutional Equities estimated the lowest at INR 290.9 billion.
In a report, Kotak Institutional Equities said the company's earnings would not be comparable on a year-on-year basis as Coal India changed its accounting policy to accommodate provisions for overburden removal. Overburden removal refers to the removal of topsoil and other gravel to expose the coal seams for extraction under the opencast mining technique. Coal India said the accounting policy change was aimed at making it compliant with global standards.
Most brokerages are not bullish on Coal India's financial performance, primarily due to lower sales on quarter, and a decline in the average coal price realisation from e-auctions.
During Jul-Sept, Coal India reported sales of 166 million tonnes. This was down 4.4% on year, as per Nuvama Wealth Management Ltd., and 16% lower on quarter, as per ICICI Securities Ltd. Most brokerages expect the company's average price realisation per tonne of sales to remain flat on a year-on-year basis at around INR 1,730. During Apr-Jun, Coal India's average realisation was at INR 1,671 rupees. Thus, effectively, revenue from coal sales is expected to decline.
On the other hand, moderating coal demand over the past few quarters, especially from the power sector, could directly hit Coal India's profit growth. Motilal Oswal Financial Services Ltd. said it expects the e-auction premium to be 65% during Jul-Sept. Although this is much higher than the average notified coal price, it is lower compared to the trends in the last financial year, when Coal India's e-auction premiums were higher by 120-190%.
E-auction premium refers to the extra price coal buyers pay to Coal India over the notified coal prices for buying coal from auctions. Auction prices start from 20?ove the notified price, and rise in accordance with participation and bids at the auctions.
While Coal India's cost of mining is the same for the coal sold through contracts and e-auctions, the latter bags much more revenue than coal sold through contractual agreements. Hence, Coal India's performance and earnings from e-auctions directly adds to its profits and determines the company's profitability.
Coal India is expected to report earnings before interest, tax, depreciation, and amortisation of INR 88.7 billion, according to the average of the estimates of seven brokerages. The estimates for EBITDA range from INR 71.9 billion by Kotak Institutional Equities and INR 112.6 billion by Antique Stock Broking.
Nuvama Wealth Management said that the EBITDA per tonne is set to decline 9% on year to INR 466, primarily due to lower sales volume and lower e-auction price, which is projected to decline 13% on year to INR 2,475 per tonne.
Shares of Coal India closed 1.2% lower at INR 489.90 on the National Stock Exchange on Thursday.
Following are the Jul-Sept earnings estimates for Coal India based on reports compiled by Informist from eight brokerage houses:
|
Brokerage firm |
Net sales (in INR million) |
Net profit (in INR million) |
EBITDA (in INR million) |
|
Antique Stock Broking Ltd |
312,645.00 |
87,541.00 |
112,552.00 |
|
Axis Securities Ltd |
315,800.00 |
54,790.00 |
73,970.00 |
|
Elara Securities (India) Pvt Ltd |
340,875.00 |
70,232.00 |
92,486.00 |
|
ICICI Securities Ltd |
303,618.00 |
70,094.00 |
93,753.00 |
|
Kotak Institutional Equities |
290,864.00 |
80,319.00 |
71,864.00 |
|
Motilal Oswal Financial Services Ltd |
316,983.00 |
80,685.00 |
98,903.00 |
|
Nuvama Wealth Management Ltd |
309,729.00 |
54,012.00 |
77,446.00 |
|
Sharekhan Ltd |
318,860.00 |
82,100.00 |
-- |
|
Average |
313,671.75 |
72,471.63 |
88,710.57 |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Avishek Dutta
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