Coal In­dia Lim­ited

The Hitavada - - BUSINESS -

COAL an­nounced that the Board has ap­proved re­vis­ing the non-cok­ing coal prices with im­me­di­ate ef­fect, and this would trans­late into ad­di­tional rev­enue of Rs64.2bn for FY19 and Rs19.56bn for the re­main­der of FY18. This comes over and above the Rs50/t in­crease in coal load­ing, which per the com­pany would re­sult in Rs25bn of ad­di­tional rev­enues in FY19. Cu­mu­la­tively, the two mea­sures would add ~Rs90bn in in­cre­men­tal rev­enues for FY19; and tak­ing ~640MT of vol­umes in FY19, it trans­lates into an ef­fec­tive price in­crease of Rs141/t or ~11% based on 2QFY18 re­al­i­sa­tion. The com­bined im­pact of th­ese 2 mea­sures more than off­sets the wage cost in­crease of Rs56.7bn. How­ever, on a net ba­sis, the earn­ings in­crease could be lim­ited given: a) likely in­crease in con­trac­tual wage costs, and b) diesel cost in­crease given the sharp in­crease in diesel prices. Net Net, this is a pos­i­tive step for the com­pany and we ex­pect a pos­i­tive re­ac­tion to the share price given the stock’s rel­a­tive un­der­per­for­mance to the do­mes­tic re­source group. We also see up­side risks to the div­i­dend and po­ten­tially even a gov­ern­ment stake sale com­ing through. The price hike needs to be seen in the con­text that coal is one of the com­modi­ties iden­ti­fied to fill the fund­ing gap in GST col­lec­tions. Hence there were ex­pec­ta­tions of an in­crease in coal levy in the up­com­ing Bud­get. For the com­pany to take a large price hike be­fore the Bud­get is pos­i­tive, in our view.

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