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Informist, Wednesday, Jul. 30, 2025
By Avishek Rakshit
KOLKATA – The trend of muted domestic coal demand, which started in the last financial year, continued in the June quarter as well. This led Coal India take a hit on two fronts: first, sales volume under long-term supply contracts were lower, and second, e-auction prices continued to cool from previous highs, as indicated by Coal India in the past quarter. While overall lower sales volume will negatively impact the top line, the fall in e-auction prices will impact the bottom line.
The world's largest coal mining company by production and sales volume is expected to report a steep 21.9% on-year and 10.9% on-quarter decline in its consolidated net profit for the June quarter at INR 85.6 billion. The top line could shrink 4.2% on year and 7.6% on quarter to INR 349.4 billion, according to the average of estimates from seven brokerages.
The highest estimate of profit of INR 103 billion is by Kotak Institutional Equities and the lowest estimate of INR 58.5 billion is by Nuvama Wealth Management Ltd. The highest revenue projection of INR 372.4 billion is by Motilal Oswal Financial Services Ltd. and the lowest of INR 324 is by Kotak. Coal India will detail its results for the June quarter on Thursday.
Brokerages expect a 4.5% on-year decline in volume at 190 million tonnes, based on the monthly production and sales volume for the June quarter that the company declared. While brokerages expect the Maharatna company to make up partially for the decline in volume through higher price realisations from sales under fuel supply agreements, lower e-auction prices during the quarter are likely to drag the overall revenue and profit down.
Kotak estimated Coal India's blended realisations rising 2% on year to INR 1,704 per tonne and e-auction realisations to rise 10% to INR 2,650 a tonne. However, Nuvama has subdued projections for the state-owned company's performance. According to Nuvama, blended price realisations could decline 1% on year to INR 1,650 per tonne due to an 8% on-year decline in realisations from e-auctions at INR 2,225 a tonne. On the other hand, price realisation from long-term contract sales could increase 2% on year to INR 1,555 a tonne. Blended price realisation is the average price realisation from fuel supply agreements, e-auctions, and washed coking and thermal coal sales.
Long-term coal supply contracts, which are often referred to as fuel supply agreements by Coal India, comprise the bulk of sales and make up around 80% of the sales volume, but it is the e-auctions that directly boost the company's profit. This is because the cost of mining is the same for the coal sold under supply agreements, where prices are notified and pre-set. However, at e-auctions, prices are entirely driven by demand and are set at least 20% higher by Coal India compared to the prevalent notified prices.
The fall in e-auction prices was foreseen by the company, which is devising ways to increase sales volume at e-auctions to at least partially negate this.
Brokerages estimate the company's sales volume to have declined 3% on year to 168-170 million tonnes and sales volume at e-auctions to have fallen 14% on year to around 20-22 million tonnes during the June quarter.
While Nuvama continued to be bearish on the company's earnings before interest, tax, depreciation, and amortisation per tonne of sales, Motilal Oswal expects an improvement in the company's consolidated EBITDA on a sequential basis.
Coal India is expected to report an EBITDA of INR 113.5 billion for Apr-Jun, according to the average of estimates of five brokerages. Antique Stock Broking Ltd. has the highest projection at INR 135.3 billion and Nuvama has the lowest at INR 92.3 billion.
At 1350 IST, shares of Coal India traded at INR 381.30 on the National Stock Exchange, down 0.6%. Coal India's shares have fallen by a little over 1% since it reported its March quarter earnings. According to data available with Informist, 10 brokerages have a 'buy' rating on Coal India with an average target price of INR 482 and one brokerage has a 'hold' rating on the stock.
Following are the Apr-Jun earnings estimates for Coal India based on reports from seven brokerages in descending order of the estimate of net profit:
|
Brokerage firm |
Net sales (in million rupees) |
Net profit (in million rupees) |
EBITDA (in million rupees) |
|
Kotak Institutional Equities |
3,23,997.00 |
1,02,979.00 |
1,08,961.00 |
|
Antique Stock Broking Ltd |
3,50,720.00 |
1,02,289.00 |
1,35,295.00 |
|
Systematix Shares and Stocks (India) Ltd |
3,46,600.00 |
93,300.00 |
1,03,400.00 |
|
Motilal Oswal Financial Services Ltd |
3,72,400.00 |
86,800.00 |
|
|
Anand Rathi Share and Stock Brokers Ltd |
3,48,162.00 |
78,897.00 |
|
|
JM Financial Institutional Securities Pvt Ltd |
3,57,681.00 |
76,141.00 |
1,27,574.00 |
|
Nuvama Wealth Management Ltd |
3,46,057.00 |
58,476.00 |
92,278.00 |
|
Average |
3,49,373.86 |
85,554.57 |
1,13,501.60 |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Avishek Dutta
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