Coal India Q4 Earnings Likely to Decline on Lower Volumes, Weaker Realization

Coal India’s Net Profit Projected to Decline Despite Higher Volumes

Coal India, the world’s largest coal-producing company, is set to announce its Q4FY25 earnings on May 7, with analysts projecting a decline in net profit. Despite the company reporting higher coal production volumes, blended realizations are expected to be under pressure, leading to a subdued performance for the March quarter.

According to a poll conducted by Moneycontrol involving six brokerages, Coal India’s net profit is estimated to decrease by 8.75 percent year-on-year to ₹7,748.20 crore, and fall by 10.3 percent sequentially. Revenue is expected to rise by 3.5 percent year-on-year to ₹37,029.70 crore, although it may show a decline on a quarter-on-quarter basis. EBITDA is forecasted to experience a 10.6 percent decline year-on-year, reaching ₹11,016.50 crore, and a 2.8 percent dip sequentially.

Highlights:

• Net profit decline of 8.75% YoY to ₹7,748.20 crore.

• Revenue growth of 3.5% YoY, but expected to decline sequentially.

• EBITDA drop of 10.6% YoY, with a 2.8% sequential decline.

Factors Driving Earnings Decline in Q4

Coal Volumes and Realizations

In Q4FY25, Coal India reported a 2 percent decline in coal production to 237 million tonnes (MT), with total offtake dropping by 1 percent year-on-year to 200 MT. Analysts predict a marginal decline of 1 percent year-on-year in volumes. Additionally, blended realizations are expected to soften by 1.5 percent year-on-year to ₹1,673 per tonne, further weighing on the company’s earnings.

Highlights:

• Coal production declined by 2% YoY, with a 1% dip in offtake.

• Blended realizations projected to soften by 1.5% YoY to ₹1,673 per tonne.

Weaker EBITDA and Elevated Employee Costs

The primary factors contributing to the weaker EBITDA performance are elevated employee costs and a seasonal trend typically observed in the fourth quarter. In addition, a moderation in e-auction premiums is expected, largely driven by a decline in global thermal coal prices. This, along with the impact of higher operational costs, is expected to put significant pressure on Coal India’s earnings.

Highlights:

• Weaker EBITDA primarily due to elevated employee costs and seasonal trends.

• Moderation in e-auction premiums amid falling global thermal coal prices.

E-Auction Premium and Volume Trends

E-auction premiums are expected to show a quarter-on-quarter decline, dropping to 55 percent in Q4, down from 76.4 percent in Q3. This decline follows a 22.5 percent drop in international thermal coal prices, which decreased to $108 per tonne. On a year-on-year basis, however, the e-auction performance showed improvement, with prices increasing by 2 percent to ₹2,545 per tonne, and e-auction volumes rising by 22 percent to 21.5 MT.

Despite the sequential decline in premiums, the overall e-auction performance has benefited from a modest improvement in coal grade mix, which led to a slight rise in Fuel Supply Agreement (FSA) price estimates. The FSA price estimate for Q4 is expected to be ₹1,527 per tonne, up from ₹1,514 per tonne in Q3.

Highlights:

• E-auction premiums decline to 55% QoQ from 76.4% in Q3.

• E-auction volumes up by 22% YoY to 21.5 MT.

• FSA price estimate rises slightly to ₹1,527 per tonne.

Areas to Watch in Q4 Results

As Coal India prepares to announce its Q4 results, key areas for investors to monitor include the e-auction realizations and the share of e-auction volumes in the total offtake. These factors will play a crucial role in determining the company’s profitability in the face of the current economic pressures. Additionally, any announcements regarding interim dividends will be closely watched by investors.

Highlights:

• Focus on e-auction realizations and their impact on profitability.

• Key announcements to watch include interim dividend declarations.