Coal India Q2 Review: Brokerages Reduce Target Prices As Profit Misses Estimates

Coal India Ltd. announced a fall in its profit for the second quarter of fiscal 2025, missing analysts' estimates.

The coal producer's company reported a 22% fall in the consolidated profit at Rs 6,275 crore for the July-September quarter, compared to Rs 8,048 crore in the same period last year, according to an exchange filing on Friday. Analysts polled by Bloomberg had estimated it at Rs 8,444 crore.

Coal India Q2 FY25 Results: Key Highlights (Consolidated, YoY)

• Revenue down 6.42% to Rs 30,672 crore versus Rs 32,776 crore (Bloomberg estimate: Rs 31,207 crore).

• Ebitda down 14.16% to Rs 8,615 crore versus Rs 10,037 crore (Bloomberg estimate: Rs 10,577 crore).

• Margin at 28.08% versus 30.62% (Bloomberg estimate: 33.9%).

• Net profit down 22.03% to Rs 6,275 crore versus Rs 8,048 crore (Bloomberg estimate: Rs 8,444 crore).

Why Did Revenues & Ebitda Fall?

Coal India's revenue degrowth in Q2FY25 was based on several factors. Volumes of the company fell 3.5% year on year due to weak power demand and heavy rainfall. The company also saw weaker blended realisations that fell 6% year on year. These weaker realisations were on the back of the fall in e-auction prices that fell Rs 366 per tonne to Rs 2,472 per tonne, as per Nuvama.

The lower revenue growth depressed Ebitda further, that fell over 14% in Q2FY25. Furthermore, the company also saw a marginal 2% annual uptick in costs per tonne to Rs 718.

Volumes Continue To Be Under Pressure

Nuvama notes that the lack of Coal India's pickup in volumes is a cause for concern. During H1FY25, sales volume of the company only edged up 1%. While Coal India will try to push volume under e-auctions, this push could hit prices. Furthermore, the brokerage also notes that a hike in fixed supply agreement prices is not visible in the near-to-medium term.

Capex

Coal India has guided for capex of Rs 15,000-20,000 crore per year for the next 4-5 years. This capex will be funded via internal accruals, and about 40% of the capex would be incurred on non-coal segments like thermal and solar power plants, coal gasification, fertiliser plants. However, it is key to note that the benefits of this capex are four–five years away.

What Brokerage Say

Citi:

• Maintain Neutral rating, reduce target price to Rs 490 from 540 earlier, implying potential upside at 6.5%

• Estimate FY25 despatch growth at 4% to 786mt

• Cut FY25/26/27 EPS estimates by 7%/9%/10% on lower volumes & blended realisations

Nuvama:

• Maintain Hold rating, reduce target price to Rs 517 from Rs 542 earlier

• Reduced FY25/26 Ebitda estimates by 6%/1%

• Expect e-auction prices to stay tepid

• Expect FSA coal prices to not rise until FY27

• Do not see much upside potential, await volume growth for a re-entry