Coal India (COALIN)

CMP: | 133 Target: | 150 ( 13%) Target Period: 12 months HOLD

September 7, 2020

Steady performance....
Coal India (CIL) reported an operationally steady set of Q1FY21 numbers. For
the quarter, topline came in lower than our estimate while EBITDA and PAT
came in higher than our estimate. CIL reported sales volumes of 120 million

Result Update
tonne (MT), down 22% YoY, 27% QoQ. Total operating income was at
| 18486.8 crore (down 26% YoY, 33% QoQ), lower than our estimate of
| 19986.8 crore. EBITDA came in at | 3051.7 crore (down 54% YoY, 55%
QoQ) but higher than our estimate of | 2098.6 crore. EBITDA margin was at
16.5% (26.5% in Q1FY20, 24.4% in Q4FY20), higher than our estimate of Particulars
10.5%. Ensuing PAT came in at | 2077.5 crore (down 55% both QoQ, YoY) Particular Amount
but higher than our estimate of 1439.4 crore. Market Capitalization | 82186.1 crore
Total Debt (FY20) | 6426 crore
YTD, both production, offtake remain lower YoY… Cash and Investments
| 28447 crore
(FY20)
In the current fiscal (YTD), the company witnessed a muted trend in both EV | 60165.1 crore
production and offtake volumes. During April-August 2020 (YTD), CIL 52 week H/L 217 / 119
reported production of 195.5 MT (down 7.0% YoY) while offtake during the Face value | 10
period was at 208.4 MT (down 13.4% YoY). During the current fiscal, August
2020 is the only month where the company was able to report growth in
production and offtake on a YoY basis. For August 2020, CIL’s coal Key Highlights
production increased 7.1% YoY to 37.2 MT (34.7 MT in August 2019) while  Fuel supply agreement (FSA)
coal offtake increased 9.3% YoY to 44.3 MT (40.6 MT in August 2019). Going sales volume was at 102.2 MT

ICICI Securities – Retail Equity Research

forward, in FY21E and FY22E, we model an offtake volume of 550 MT and (130.3 MT in Q1FY20) while FSA
575 MT, respectively. For FY20, production volume was at 602 MT (down 1% realisation during the quarter
YoY) while offtake volume was at 581 MT (down 4% YoY). was at | 1359.5/tonne
(| 1370/tonne in Q1FY20)
EBITDA margins to hover at ~18% in next couple of years...
 E-auction volumes at 15.9 MT
We expect EBITDA margins to hover at ~18% in the next couple of years (19.1 MT in Q1FY20) while e-
(18% for FY21E, 18.3% for FY22E, FY20 EBITDA margin at 22.8%). EBITDA auction realisations at |
margin is likely to decline from FY20 levels due to a muted trend in e-auction 1598/tonne (| 2155/tonne in
realisations and overall subdued trend in offtake volumes. Q1FY20)

Valuation & Outlook  Maintain HOLD rating on

stock with target price of | 150
CIL reported an operationally steady Q1FY21 performance. Going forward,
we model sales volume of 550 MT for FY21E and 575 MT for FY22E.
Furthermore, we expect EBITDA margins to hover at ~18% over the next
couple of years. We value the stock at 5x FY22E adjusted EV/EBITDA and
arrive at a target price of | 150. We maintain our HOLD recommendation. Research Analyst
Dewang Sanghavi
dewang.sanghavi@icicisecurities.com

Key Financial Summary

(| crore) FY18 FY19 FY20 FY21E FY22E
Total Operating Income 85,244.2 99,585.6 96,080.3 93,286.3 97,268.9
EBITDA 9,288.2 25,005.9 21,920.9 16,821.7 17,839.2
EBIDTA Margin (%) 10.9 25.1 22.8 18.0 18.3
PAT 7,038.0 17,464.5 16,700.4 13,656.2 14,122.1
EPS (|) 11.3 28.3 27.1 22.2 22.9
EV/EBITDA (x) 5.7 2.1 2.7 4.3 4.4
RoCE (%) 40.8 86.3 55.5 40.2 40.1
ROE (%) 34.9 66.0 51.9 39.0 36.9
s

Source: Company, ICICI Direct Research

 Result Update | Coal India ICICI Direct Research

Exhibit 1: Variance Analysis

Q1FY21 Q1FY21E Q1FY20 YoY (%) Q4FY20 QoQ (%) Comments
Total Operating Income 18486.8 19986.8 24939.0 -25.9 27,568.2 -32.9 Topline came in lower than our estimate
Other Income 785.1 1000.0 1150.2 -31.7 1,913.2 -59.0
Total Expenditure 15435.1 17888.2 18326.6 -15.8 20,839.4 -25.9
EBITDA came in higher than out estimate on
EBITDA 3051.7 2098.6 6612.4 -53.8 6,728.9 -54.6 account of lower employee cost & contractual
expense
EBITDA Margin (%) 16.5 10.5 26.5 10 bps 17.7 (880) bps
Depreciation 852.6 1050.0 734.3 16.1 1029.4 -17.2
Interest 183.0 125.0 16.6 1004.1 165.1 10.8
Share of JV -1.1 0.0 -0.8 39.5 0.1 -1063.6
PBT 2800.1 1923.6 7011.0 -60.1 7447.4 -62.4
Total Tax 722.6 484.2 2381.1 -69.7 2821.6 -74.4
PAT 2077.5 1439.4 4629.9 -55.1 4625.8 -55.1 PAT came in higher than our estimates
Key Metrics
Coal Sales (million tonne) 120.4 120.6 153.0 -21.3 164.0 -26.6 Sales volumes came in line with out estimate
Source: Company, ICICI Direct Research

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 Result Update | Coal India ICICI Direct Research

Financial story in charts

Exhibit 2: Trend in production

700
605 607 602
560 580
600
500 Modelled coal production of 560 MT for FY21E and
million tonne (MT)

400 580 MT for FY22E

300
200
100
0
FY18 FY19 FY20 FY21E FY22E

Source: Company, ICICI Direct Research

Exhibit 3: Trend in offtake

620 608

600
580 581
million tonne (MT)

580 575
Modelled coal offtake of 550 MT for FY21E and 575
550
560 MT for FY22E

540

520
FY18 FY19 FY20 FY21E FY22E

Source: Company, ICICI Direct Research

Exhibit 4: Trend in reported consolidated EBITDA margin (in %)

30.0
25.1
25.0 22.8
Over the next couple of years, we expect EBITDA
18.0 18.3
20.0 margin to hover at ~18-18.3%
(%)

15.0
10.9
10.0

5.0

-
FY18 FY19 FY20 FY21E FY22E

Source: Company, ICICI Direct Research

Exhibit 5: Valuation
Op. Inc. Growth EPS Growth PE EV/EBITDA RoNW RoCE
(| cr) (%) (|) (%) (x) (x) (%) (%)
FY18 85,244 9.0 11.3 -51.2 11.7 5.7 34.9 40.8
FY19 99,586 16.8 28.3 149.9 4.7 2.1 66.0 86.3
FY20 96,080 -3.5 27.1 -4.4 4.9 2.7 51.9 55.5
FY21E 93,286 -2.9 22.2 -18.2 6.0 4.6 39.0 40.2
FY22E 97,269 4.3 22.9 3.4 5.8 4.4 36.9 40.1
Source: Company, ICICI Direct Research

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 Result Update | Coal India ICICI Direct Research

Exhibit 6: Recommendation History vs. Consensus

30.0
520
470 25.0
420
370 20.0
320
(|)

15.0

(%)
270
220
10.0
170
120 5.0
70
20 0.0
Aug-17 Nov-17 Jan-18 Apr-18 Jun-18 Aug-18 Nov-18 Jan-19 Apr-19 Jun-19 Aug-19 Nov-19 Jan-20 Apr-20 Jun-20 Sep-20

Price Idirect target Consensus Target Mean % Consensus with Hold

Source: Bloomberg, Company, ICICI Direct Research

Exhibit 7: Top 10 Shareholders

Rank Name Latest Filing % O/S Position (m) Change (m)
1 GOVERNMENT OF INDIA 30-06-2020 66.1 4075.6 0.0
2 HDFC ASSET MANAGEMEN 30-06-2020 3.7 227.2 15.3
3 RELIANCE CAPITAL TRU 03-09-2020 3.1 191.6 -0.1
4 ICICI PRUDENTIAL ASS 31-07-2020 1.1 67.2 4.0
5 GIC PRIVATE LIMITED 30-06-2020 1.0 64.3 0.6
6 VANGUARD GROUP 31-07-2020 0.9 52.2 -0.7
7 SBI FUNDS MANAGEMENT 31-07-2020 0.7 43.6 5.0
8 BLACKROCK 02-09-2020 0.6 37.5 0.0
9 ADITYA BIRLA SUN LIF 31-07-2020 0.5 27.7 -4.9
10 LAZARD LTD 31-07-2020 0.3 20.2 -5.2
Source: Bloomberg, ICICI Direct Research

Exhibit 8: Shareholding Pattern

(in %) Dec-19 Mar-20 Jun-20
Promoter 69.1 66.1 66.1
Others 31.0 33.9 33.9
Total 100.0 100.0 100.0
Source: Company, ICICI Direct Research

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 Result Update | Coal India ICICI Direct Research

Financial summary

Exhibit 9: Profit and loss statement | crore Exhibit 10: Cash flow statement | crore
(Year-end March) FY19 FY20 FY21E FY22E (Year-end March) FY19 FY20 FY21E FY22E
Total Operating Income 99586 96080 93286 97269 Profit after Tax 17464 16700 13656 14122
Growth (%) 16.8 -3.5 -2.9 4.3 Add: Depreciation 3450 3451 3537 3626
Total Operating Expenditure 74580 74159 76465 79430 Add: Interest 264 503 377 283
EBITDA 25006 21921 16822 17839 (Inc)/dec in Current Assets -1673 -17855 -8479 -7396
Growth (%) 169.2 -12.3 -23.3 6.0 Inc/(dec) in CL and Prov. 17 7629 -1203 3114
Depreciation 3450 3451 3537 3626 CF from operating activities 19523 10428 7889 13749
Interest 264 503 377 283 (Inc)/dec in Investments -1466 1197 0 0
Other Income 5837 6105 5342 4942 (Inc)/dec in Fixed Assets -7880 -6287 -8000 -8000
Exceptional Item 2 1 0 0 Others -138 -184 -1000 -1000
PBT 27127 24071 18250 18872 CF from inves ting activities -9484 -5273 -9000 -9000
Total Tax 9662 7371 4593 4750 Issue/(Buy back) of Equity 45 -14 50 50
PAT 17464 16700 13656 14122 Inc/(dec) in loan funds 672 4223 -500 -500
Growth (%) 148.1 -4.4 -18.2 3.4 Interest Paid -264 -503 -377 -283
Adj EPS (|) 28. 3 27. 1 22. 2 22. 9 Dividend paid & dividend tax -9446 -7972 -10816 -10816
Source: Company, ICICI Direct Research Others -1742 -3027 0 0
CF from financing activities -10735 -7292 -11643 -11548
Net Cash flow -696 -2137 -12754 -6799
Opening Cash 31280 30585 28447 15693
Clos ing Cas h 30585 28447 15693 8894
Source: Company, ICICI Direct Research

Exhibit 11: Balance sheet | crore Exhibit 12: Key ratios | crore
(Year-end March) FY19 FY20 FY21E FY22E (Year-end March) FY19 FY20 FY21E FY22E
L iabilities Per s hare data (|)
Equity Share Capital 6163 6163 6163 6163 Adj EPS 28.3 27.1 22.2 22.9
Reserve and Surplus 20292 25994 28835 32141 Cash EPS 33.9 32.7 27.9 28.8
Total Shareholders funds 26455 32157 34998 38304 BV 42.9 52.2 56.8 62.2
Total Debt 2203 6426 5926 5426 DPS 13.1 12.0 12.0 12.0
Minority Interest 408 394 444 494 Cash Per Share 49.6 46.2 25.5 14.4
Total L iabilities 29066 38977 41368 44224 Operating Ratios (%)
Assets EBITDA Margin 25.1 22.8 18.0 18.3
Gross Block 77793 85925 91925 97925 PBT / Total Operating income 27.2 25.1 19.6 19.4
Less: Acc Depreciation 45136 49084 52621 56247 PAT Margin 17.5 17.4 14.6 14.5
Net Block 32657 36841 39304 41678 Inventory days 27 33 45 45
CWIP 9619 8271 10271 12271 Debtor days 22 59 72 75
Investments 3170 1973 1973 1973 Creditor days 176 180 170 165
Inventory 5584 6619 9427 9793 Return Ratios (%)
Debtors 5499 14408 17079 18609 Adj RoE 66.0 51.9 39.0 36.9
Loans and Advances 13743 14924 16924 18924 Adj RoCE 86.3 55.5 40.2 40.1
Other Current Assets 28104 34834 35834 39334 Valuation Ratios (x)
Cash 30585 28447 15693 8894 P/E 4.7 4.9 6.0 5.8
Total Current Assets 83514 99231 94956 95552 EV / EBITDA 2.1 2.7 4.3 4.4
Current Liabilities 44749 44028 40325 40939 EV / Net Sales 0.5 0.6 0.8 0.8
Provisions 58667 67017 69517 72017 Market Cap / Sales 1.3 1.4 1.4 1.4
Current Liabilities & Prov 103416 111045 109841 112956 Price to Book Value 5.0 4.1 3.8 3.5
Net Current Assets -19902 -11813 -14885 -17403 Solvency Ratios
Others 3522 3706 4706 5706 Debt/EBITDA 0.1 0.3 0.4 0.3
Application of Funds 29066 38977 41368 44224 Debt / Equity 0.1 0.2 0.2 0.1
Source: Company, ICICI Direct Research Current Ratio 0.8 0.9 0.9 0.8
Quick Ratio 0.8 0.8 0.8 0.8
Source: Company, ICICI Direct Research

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 Result Update | Coal India ICICI Direct Research

Exhibit 13: ICICI Direct coverage universe (Metals and Mining)

CMP TP M Cap EPS (|) P/E (x) EV/EBITDA (x) ROCE(%) ROE(%)
(|) (|) Rating (| Cr) FY20 FY21E FY22E FY20 FY21E FY22E FY20 FY21E FY22E FY20 FY21E FY22E FY20 FY21E FY22E
Coal India 132 150 Hold 82186 27.1 22.2 22.9 5.0 6.1 5.9 2.8 4.4 4.5 55.5 40.2 40.1 51.9 39.0 36.9
Hindalco 188 225 Buy 43432 18.2 16.4 29.2 10.6 11.7 6.6 5.6 7.6 5.5 7.8 6.0 8.4 6.9 6.0 9.7
Hind Zinc 222 195 Hold 93718 16.1 12.4 18.8 11.8 15.3 10.1 6.6 8.2 4.8 20.8 20.0 26.0 16.9 14.5 19.0
JSW Steel 282 210 Hold 68225 19.5 3.3 22.2 10.5 61.3 9.2 8.9 11.7 6.5 7.2 4.5 10.6 12.7 2.1 12.5
NMDC 94 100 Hold 28705 11.8 11.6 9.0 8.3 8.4 10.8 4.9 5.4 5.9 20.3 14.3 9.9 13.1 11.3 8.3
Ratnamani 1174 1320 Buy 5252 65.8 49.5 66.0 17.1 22.7 17.0 12.5 16.0 11.4 22.2 14.8 19.8 18.0 12.3 14.4
Graphite Ind. 187 200 Hold 3473 2.0 1.0 21.0 80.8 231.3 8.7 NA NA 3.2 -2.6 -5.4 6.0 1.0 0.3 8.7
Tata Steel 421 450 Hold 50737 41.4 -20.3 56.7 10.1 NA 7.4 9.1 12.6 5.7 5.0 2.0 8.9 6.4 -3.2 8.0
HEG 812 750 Hold 3004 14.0 4.0 74.0 56.1 192.7 10.5 NA NA 4.4 1.6 1.4 11.0 1.6 0.5 7.9
Mah Seamless 232 265 Hold 1555 54.0 35.9 45.9 4.6 7.0 5.4 5.0 6.2 4.8 10.4 7.8 9.7 3.6 7.1 8.4
Source: ICICI Direct Research, Company

ICICI Securities | Retail Research 6

 Result Update | Coal India ICICI Direct Research

RATING RATIONALE
ICICI Direct endeavors to provide objective opinions and recommendations. ICICI Direct assigns ratings to its
stocks according to their notional target price vs. current market price and then categorizes them as Buy, Hold,
Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined
as the analysts' valuation for a stock
Buy: >15%
Hold: -5% to 15%;
Reduce: -15% to -5%;
Sell: <-15%

Pankaj Pandey Head – Research pankaj.pandey@icicisecurities.com

ICICI Direct Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
research@icicidirect.com

ICICI Securities | Retail Research 7

 Result Update | Coal India ICICI Direct Research

ANALYST CERTIFICATION
I/We, Dewang Sanghavi MBA (Finance) Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s)
or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this report
have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.

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ICICI Securities | Retail Research 8