One good quarter followed by a weak quarter. That pretty much sums up the trend in Coal India Ltd’s financial performance for the past six quarters. Following that trend, the September quarter earnings have been rather lacklustre. Sure, net profit growth is looking good compared with the past two quarters. For instance, Coal India’s consolidated net profit for the last quarter increased by about 19% from a year earlier to Rs.3,078 crore. Compare this to about 8% profit growth in the June quarter and about 5% decline in the March quarter.
However, investors would do well to recall that Coal India’s performance during the last year’s September quarter was adversely affected on account of excessive rainfall. The company had posted a decline in its production (11.3%) and offtake (5.2%) in the September 2011 quarter. That is obviously one of the main reasons why growth rates in production and offtake look relatively stronger in the September 2012 quarter. Coal India’s production and offtake increased by 10.9% and 8.5% respectively last quarter.
Investors need to keep a tab on whether the company will be able to achieve the current fiscal year offtake target of 470 million tonnes. On the production front, Coal India had set out to achieve 6.5% growth for this fiscal year at 464 million tonnes. For the half year ended September, production increased by 8.5%, which is comfortable.
Meanwhile, Coal India’s revenue for the September quarter increased by around 11% to Rs.14,572 crore. That’s lower than about 14% revenue growth the company reported in the June quarter. Blended price realizations too came in sequentially lower in the last quarter at Rs.1,432 per tonne against Rs.1,460 a tonne. One reason for the decline in realization is the decrease in electronic auction prices. On the operating front, while profit margin improved from a year earlier, there is a sharp drop on a sequential basis.
So far in this fiscal year, the Coal India stock has corrected by 9% from its highs in September to Rs.346. Analysts attribute the recent underperformance to the fall in e-auction prices and uncertainty over fuel-supply agreements. The September quarter numbers leave little room for any earnings upgrades, which keeps the outlook for the near-term muted.