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ET Intelligence Group: Strong volume growth, supported by higher prices, helped Coal Indians -1.34 % register multiple quarterly records — production, profits and sales — in the three months to March. Net revenue climbed 7.5 per cent on-year to Rs 28,546 crore. Net profit was Rs 6,024 crore against Rs 1,303 crore in the previous March quarter.

Operating profit or earnings before interest, tax, depreciation and amortisation (EBITDA) was Rs 8,212 crore against expectations of Rs 7,200 crore. EBIDTA margin was at 28.8 per cent Analysts remain bullish due to stable power demand and thermal power capacity addition, which should increase sales of the solid fuel. Strong performance, positive demand outlook and history of strong dividend payments make Coal India an attractive bet. At the current price of Rs 253, its stock is trading at more than 8 per cent expected dividend yield. In the last five years, Coal India has already paid Rs 114 per share as dividend. The stock is trading at 9 times earnings.

Coal demand, in our view, should continue to grow at 7 per cent for the next 2-3 years. Given stable power demand growth, coupled with new plant additions, we envisage strong off-take growth for Coal India from FY19 to FY21

In FY19, Coal India produced 607 million tonnes, a 7 per cent growth on year. Its production has risen at 6 per cent CAGR for the past three years. In the March quarter, production volumes grew 6 per cent and offtake 3 per cent. However, higher realisation helped register a growth of 7.5 per cent. Realisations were higher for both fuel supply agreement and e-auction sales.

Better average realisation in both FSA and e-auction sales coupled with operational cost control propelled the company to its best ever financial performance. Importantly, coal quality variance was under control and we have been able to arrest grade slippage to a large extent. E-auction, where the company enjoys more than 100 per cent premium over FSA sales, accounted for 12 per cent of total volumes.

In April, Coal India registered a production growth of 1 per cent and offtake growth of 2.6 per cent. Analysts expect the realisation to remain strong, suggesting another steady quarter for the largest coal producer in the world.