Coal India Q1 profit disappoints but analysts still positive, stock rebounds

Coal India today gained as much as 6.2 percent after hitting a record low of Rs 248.25 in early trade.

The company posted its first quarterly profit decline in five quarters on Saturday, saying lower sales realisations and higher wage and diesel costs were to blame.

The state-owned miner said net profit for its fiscal first quarter fell to Rs 3731 crore against expectations of Rs 4240 crore on lower realisations from e-auction sales.

Chairman and managing director, S Narsing Rao in an interview to CNBC-TV18 said that e-auction volumes remained flat but realisations slipped significantly to Rs 2,140 per tonne.

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Brokerage Kotak termed the earnings as a’mixed bag’ due as a weak e-auction realsations and modest volume growth were partially offset by lower-than-estimated employee cost.

“While the price increase taken in June will have a spillover benefit, a depreciating local currency may help stabilize e-auction prices, even

as conclusion of the proposed disinvestment will take away a much-needed overhang,” said Kotak Institutional Equities in a report dated 5 August, 2013.

Global investment bank Morgan Stanley retained its “overweight” call on Coal India with a target of Rs 413 saying lower e-auction realization drove earnings miss.

Thefirm also marginally missed its output target for July by two percent, to 32.77 MT of dry-fuel during the month. The state-run firm, had set a production target of 33.44 MT for the month.

Coal India shares were down up 5.2 percent at 12: pm, after earlier hitting a record low at Rs 248.25.

However, brokerage Prabhudas Liladhar has an accumulate rating on the stock given the current beaten down valuations and attractive dividend yield at 7% .