COAL’s This autumn money Ebitda rose 56% y-o-y and was 18% above JEFe, primarily led by better-than-expected FSA realisation. A giant working capital launch drove sturdy money flows in FY22. COAL’s top-line outlook has improved, led by pickup in volumes and rising e-auction costs. However, larger employees price because of staff’ wage revision ought to pose a headwind. Its 6x FY24e PE is cheap, however long-term outlook stays unsure. We retain Hold with Rs 175 PT (earlier Rs 160).
Good This autumn outcomes: COAL’s This autumn dispatch volumes grew 9% y-o-y whereas ASP rose 12% q-o-q. FSA (linkage) volumes had been up 13% y-o-y and ASP rose 8% q-o-q (+6% y-o-y), presumably boosted by year-end incentives. E-auction volumes fell 4% y-o-y however ASP rose 25% q-o-q amid sturdy world coal costs. Reported Ebitda was up 42% y-o-y and was a slight under 2% under JEFe. Excluding non-cash stripping exercise adjustment expense, money Ebitda rose 56% y-o-y and was 18% above JEFe. Cash price/t fell 1% y-o-y whereas money Ebitda/t rose 43% y-o-y. PAT was up 46% y-o-y and was 7% above JEFe led by larger monetary earnings. COAL has declared ultimate dividend of `3/sh, taking the entire dividend for FY22 to Rs 17/sh.
Improved top-line outlook: COAL’s dispatch volumes rose a robust 15% y-o-y in FY22 after a 6% decline over FY19-21; FY23 has began properly with 6% progress in April. We think about COAL’s dispatch volumes rising at 5% CAGR over FY22-24E. A worth hike for linkage coal could also be on the horizon, as the corporate often raises costs near wage revisions; we assume a ten% hike in Q2FY23. E-auction realisations ought to stay excessive given the sharp rally in world coal costs, though e-auction volumes will doubtless stay range-bound because of diversion of coal to the facility sector.
Wage hike to push up prices: COAL’s employee wages are raised each 5 years, and a revision is due from June 2021. COAL had mentioned in Q3 name that wage negotiations may conclude solely by end-FY23. In the final two revisions, employees price rose 44% over FY11-13 and FY16-18; we think about 41% improve over FY21-24. We anticipate money Ebitda/t to enhance from Rs 430 in FY22 to Rs 491 in FY23 however then fall to Rs 441 in FY24.
Big working capital launch in FY22: COAL’s web working capital worsened considerably from 16 days of gross sales in FY19 to 85 days in FY21 (FY16-20 common: 52 days), however has improved to 33 days at end-FY22. Receivables particularly have come down from Rs 196 bn in FY21 (80 days) to Rs 114 bn (38 days) in FY22. Good Ebitda and large working capital launch have resulted in a pointy rise in FCF from unfavourable Rs 12-20 bn in FY20-21 to +Rs 283 bn in FY22. Further working capital launch is likely to be powerful, and we anticipate FCF of Rs 45-46 bn in FY23-24E.
Retain Hold: COAL trades at an inexpensive 5.5x/6.3x FY23E/FY24E PE and presents 10-11% dividend yield, albeit partly funded by steadiness sheet. FY23 outlook is nice with 22% Ebitda progress, however we then anticipate a 7% decline in FY24. Long-term considerations round functionality to ship sustainable quantity progress, lack of well-defined worth hike coverage, rising employees price and ESG stay. We elevate FY23-24 EPS by 8-15% primarily factoring in larger e-auction realisations. We retain Hold with Rs 175 PT (earlier Rs 160) at 6x FY24E PE.
Source: www.financialexpress.com”