Coal India Offtake Rises In February But Likely To Miss FY20 Target

Coal India Ltd.'s offtake rose for the third straight month on a yearly basis in February even as the world's largest coal miner is expected to miss its FY20 target.

Offtake, or despatches, grew 6.9 percent year-on-year in February to 54.97 million tonnes, according to its exchange filing.

The state-owned miner's sales grew 7 percent for the second consecutive month, driven by robust performance in its larger subsidiaries. Northern Coalfields Ltd. and Mahanadi Coalfields Ltd. showed the highest growth in despatches at 14.5 percent year-on-year and 11.1 percent, respectively.

Despatch volumes in FY20, however, declined 3.7 percent year-to-date to 528 million tonnes—much lower than the company's set target of 640 million tonne.

The state-run miner's production rose 14.2 percent year-on-year in February to 66.3 million tonnes—higher than the monthly run-rate of 43 million tonnes recorded in the first nine months of financial year 2019-20. Western Coalfields Ltd. clocked the highest increase of 27 percent while Central Coalfields Ltd. and South Eastern Coalfields Ltd. reported an increase of 20.1 percent and 19.1 percent, respectively.

Brokerage View

Kotak Institutional Securities, which has a ‘Buy' rating on Coal India, in its note highlighted that the world's largest miner of the fossil fuel is looking to aggressively ramp-up production and despatches to boost its full-year numbers.

The brokerage, however, admitted that a recovery in demand from the power sector will be the key to overall improvement.

Edelweiss Securities, which expects Coal India to meet the brokerage's offtake target of 590 million tonnes, is hopeful that FY21 will be better than the ongoing financial year.

Overall, 23 out of 27 analysts tracked by Bloomberg have a ‘Buy' rating on Coal India and suggest a potential upside of 47 percent.