As Coal India gears up for its Q2 FY25 earnings report, analysts brace for a challenging quarter marked by declining revenues and operational performance. The primary culprit for this anticipated downturn is a robust monsoon that has substantially impacted coal off-take and auctions. This article presents a preview of the expected financial landscape for Coal India, highlighting various factors that may affect the company’s upcoming earnings.
Earnings Projection
Analysts have forecasted weak earnings for Coal India in Q2, primarily due to a marked decline in revenue and operational performance. The downturn arises from a significant reduction in coal off-take influenced largely by adverse weather conditions during the quarter.
Dispatch and Revenue Decline
According to recent data, Coal India’s coal dispatches have plummeted by 16% year-over-year, amounting to 166 million tonnes (mt) in Q2FY25. This significant drop is expected to lead to a projected revenue decline of approximately 13%, with estimates falling from ₹32,776.4 crore in the previous quarter to around ₹28,515 crore, as gathered from a survey that included five brokerages.
Accounting Changes
This quarter’s earnings are not directly comparable to the same period last year, as Coal India has implemented a change in accounting policy concerning provisions for overburden removal. This adjustment complicates the assessment of year-on-year performance.
E-auction Performance
The performance of e-auction coal sales appears to be underwhelming, with premiums expected to decrease to around 50%, down from 58% in the prior quarter. Additionally, the volumes from e-auctions are anticipated to drop significantly, from 23% in Q1FY25 to just 18% in Q2FY25.
Impact on Operations
The combination of reduced off-take, fewer e-auction volumes, and declining premiums threatens to exert further pressure on Coal India’s quarterly revenue. Year-over-year comparisons suggest that these operational challenges will reflect a decrease in overall revenue.
Operating Metrics
Amidst these challenges, analysts from Kotak Institutional Equities indicate a potential 35% quarter-on-quarter decline in Coal India’s EBITDA, forecasting it to plummet to ₹5,338 crore. Additionally, the EBITDA margin is expected to contract by 859 basis points, landing at 17.8% for the quarter, highlighting substantial operational struggles that could concern shareholders.
Blended Realizations
Analytic estimates show that the blended realization per tonne is likely to remain flat at ₹1,730 year-over-year. However, realizations from e-auction sales are predicted to fall sharply to ₹2,500 per tonne, marking a significant 12% year-over-year decline and further exacerbating Coal India’s revenue woes.
Market Anticipations
Looking ahead, analysts will closely monitor Coal India’s management guidance regarding volume projections and the share of e-auction premiums for FY25 and FY26. This guidance will be crucial in shaping analysts’ expectations and investment decisions going forward.
Stock Performance
Despite some recent declines—over 5% in the last month and a 3% dip in the past three months—Coal India’s stock has exhibited impressive growth year-to-date, rising over 27% and over 56% in the past year. Currently, shares are trading slight ups at ₹476.95 per share, showcasing resilience amid market fluctuations.
Conclusion
The upcoming Q2 earnings report is set to reveal the challenges that Coal India faces due to adverse weather impacts and shifting market dynamics affecting coal off-take and auction metrics. Investors and market stakeholders must navigate these insights with caution as they assess the long-term viability of their portfolios.
FAQ
Q: What are the expected earnings for Coal India in Q2 FY25?
A: Analysts predict a decline in earnings, with a significant drop in revenue anticipated due to reduced coal off-take caused by the monsoon.
Q: How much have Coal India’s coal dispatches fallen?
A: Coal dispatches have fallen by 16% year-over-year, amounting to 166 million tonnes in Q2FY25.
Q: What is the outlook for e-auction performance?
A: E-auction sales premiums are expected to decrease from 58% to around 50% while volumes are projected to drop to 18% in Q2FY25.
