ShreeMetalPrices: Operational Improvements are Improving Coal India’s Chances.


Shares of Coal India may have fallen from their recent 52-week highs due to market weakness. But investors has still earn returns of more than 47% in 2022.

The improvement in operating performance is driving Coal India’s fortunes as the country’s demand for coal stays high. Firm global prices, along with strong domestic demand, have increased realisations at the company’s e-auctions and improved profitability outlook.

Additionally, “Coal India has been impressive with its output rise, producing 159.75 million tonne in Q1 (April to June), up 28.8% year over year“, and keeping the momentum into Q2 – April through August saw a 253.3 million tonne increase in coal production, or 21.1%, over the previous year.

Despite certain supply limitations brought on by the monsoons, experts said that even sales volumes that had increased by more than 10% in Q1 increased by 9.1% from April to August. August had an 8.5% yearly increase in production.

Strong coal prices across the board increase the likelihood of profits. The worldwide benchmark, South African thermal coal, had reached an all-time high of about $200 per tonne in October 2021 and, according to CareEdge Research data, peaked at over $300 per tonne in April 2022 before settling at $285 per tonne in June 2022.

Coal India benefited from this as e-auction realisations at 4,339.97 a tonne during Q1 increased 176.6% year-on-year and 78.3% sequentially“.

Growth in Coal India Continue.

The increased thermal power plant load factor (PLF), coupled with rising domestic coal demand, led to higher e-auction premiums, according to analysts at Elara Securities India Pvt Ltd. Together, these factors confirm that “Coal India might continue to have greater growth in the ensuing quarters in terms of volumes and prices“, the analysts continued.

We foresee some decrease in the peak e-auction prices in the next quarters,” stated representatives of Axis Securities Ltd. “However, we expect the prices to stay lofty supported by robust power demand and high international coal prices.”

For Coal India, analysts have also been updating their volume projections. For FY23, Axis Securities has increased its estimate of sales volume from 690 million tonnes to 700 million tonnes.

During FY22, the company produced roughly 622.6 million tonne of coal, and 662.3 million tonne was sold.

Earnings will probably increase as a result of increasing volumes and greater e-auction realisations. Ebitda increased dramatically in Q1 by 153% year over year and 35% sequentially, boosted by both top line growth and lower staff expenses (down 3% year over year and 7% sequentially, respectively). The company recorded a 58,833 crore attributable net profit, up 179% year over year and 32% sequentially.

Future experts at Elara predicted that net earnings would increase by 84% year over year in FY23. Additionally, they claimed that strong prices at online auctions would cause total pricing to outstrip wage increases. Therefore, the issue of how the wage increase would affect future earnings is no longer an issue.

A larger dividend yield for investors will be a result of the increased net earnings. At the current market price, analysts at Motilal Oswal Financial Services anticipate a 10% dividend yield because they believe that future good earnings will produce healthy dividends.