Coal India Limited (CIL) is an Indian central public sector undertaking (PSU) under the ownership of the Ministry of Coal, Government of India. The company has their headquarters at Kolkata. It is the largest government-owned-coal-producer in the world. It is also the seventh largest employer in India with close to 272,000 employees.
CIL contributes to about 82% to the total coal production in India and the company is the single largest coal producing company in the world. In April 2011, the Government of India conferred the Maharatna status to CIL, making it one of the seven in India. CIL ranks 8th among the top 20 firms responsible for a third of all global carbon emissions.
Coal India Ltd is primarily engaged in mining and production of Coal and also operates Coal washeries. The major consumers of the company are the power and steel sectors. Consumers from other sectors include cement, fertilizers, brick kilns, etc.
Quarterly Growth Walkthrough
Coal India has produced amazing September quarter results. International coal prices have fallen down from the high of about $400 per tonne, witnessed in March 2022, to the current level of $110 per tonne. Quarterly growth for Revenues from Operations were up by 28 percent to Rs 29,838 crore and the Net Profit is up by 106 percent to Rs 6,044 crore. FSAs (Fuel Supply Agreements) had a slump in price realisation of 2 percent quarter on quarter (QoQ), whereas e-auction realisation has risen by 40 percent and is steadily about 330 percent higher than FSA realisation. The high volumes have been transferred towards FSA-based power plants, and the consequences have lessened the volumes in e-auction window.
| Sep 2022 | June 2022 | Sep 2021 | QoQ | YoY | |
| Production Volumes | 140 | 160 | 126 | -13% | 11% |
| Sales Volumes | 154.5 | 177.5 | 147 | -13% | 5% |
| Net Sales | 27,500 | 32,500 | 21,300 | -15% | 30% |
| EBITDA | 7,300 | 12,250 | 3,950 | -40% | 85% |
| Net Profit | 6,044 | 8,834 | 2,933 | -32% | 106% |
Company Highlights
Working capital cycle (Inventories and Receivables without Sundry Creditors) stands at 35 days, compared to 36 in March 2022 and 52 in September 2021.
The employee cost in FY22 was at Rs 40,700 crore, whereas in H1FY23 it is at Rs 20,900 crore.
Considering October 2022, production has risen by 6.3 percent but the off-take has fallen by 5 percent year on year (YoY). For the period between April and October, production was at 352 million tonnes (18 percent growth) and off-take was at 386 million tonnes (6 percent growth).
The increase in demand from the power sector and replacement of imported coal have empowered CIL to report better production and off-take numbers. The redrafting in coal prices which is supplied under FSA is pending as the previous revision occurred back in 2018. The supplies under FSAs are about 80 percent of the off-take. An expectation for a price hike of about 5 percent in FSA-based supplies.
The prices of imported coal have fallen down in the recent months, which will put constraints on e-auction premium realisation. By comparing the production cost per tonne of coal for the September quarter, its calculated to Rs 1,430 per tonne but FSA realisation is Rs 1,414 per tonne. This is an indication which points that CIL would have been running into losses, if the company had been selling only to FSA-based customers. Therefore, profitability and higher cash flows are arising only from e-auction customers. Considering the short-term future, with undue pressure on e-auction realisation due to lower international coal prices, the company’s profitability will be hampered.
In accordance with the annual report, CIL has proposed a capital expenditure of Rs 16,500 crore for 2022-23, versus Rs 15,400 crore in 2021-22. The company has made arrangements to invest a significant amount in project diversification and higher capital expenditure during FY22-23. These projects have a high probability to weaken the return ratio and consume the cash reserves of the company.
Technical Analysis
Coal India share price has faced stiff resistance on the 23.6% retracement level, but the price made a break above and now faces rejection at the 38.2% retracement level. The price is above the 200-day moving average which makes it slightly expensive however the MFI is at 43 points which indicates that a long entry might soon occur if the stock continues to slump. Despite the higher dividend yield of CIL, the growth in volumes will face severe hindrance, hence the stock will give poor returns from the long-term perspective.
Disclaimer: We do not endorse or encourage you to take trades or investment decisions based upon our posts/research, all of your trading and investment activities are your own and should be taken through consultation with reputed financial advisors. The analysis posted on this website has been created by involving multiple mediums which are present over the Internet.