Target: ₹495
CMP: ₹478.95
Coal India (CIL) posted stable June 2024 performance figures.
Production was up 8.8 per cent y-o-y while despatches rose by a mere 5.1 per cent y-o-y. In Q1-FY25, despatches to the power sector grew 4 per cent y-o-y while offtake by the nonregulated sector (NRS) jumped a sharp 16 per cent y-o-y. Rake availability during Q1FY25 improved 10.3 per cent y-o-y at 367.2/day. Pit-head inventory at end-June’24 was at 81.5 mt (up 40 per cent).
In our view, despatch to power plants was lower than expected owing to high stocks (45 mt).
While we expect the e-auction price in June’24 to have fallen further, in view of higher despatches, average realisation is still expected to be ahead of our Q1-FY25 estimate. We expect volume offered for e-auction to rise further, particularly from MCL/SECL as they have sufficient stock.
CIL’s supplies to the power sector has ebbed due to sufficient stocks at power plants. However, we believe that higher supplies to NRS on the back of CIL’s higher production and comfortable pit-head inventory are likely to boost the overall realisation. Thus far, both NRS volume and price are expected to be better than our estimates.
We retain our Add rating on the stock with an unchanged TP of ₹495 based on 7.5x FY26E EPS.