Bullish for COALINDIA: Strong Adjusted Q4 Profit Signals Q1 Earnings

Coal India's Q4 FY18 reported PAT of Rs 1295 crore was misleadingly low due to significant one-time provisions of Rs 7384 crore and other income of Rs 2000 crore. After adjusting these, the actual underlying profit was Rs 6679 crore, translating to a robust Net Profit Margin (NPM) of 26.54%. This indicates a much healthier operational performance than initially perceived.

This re-evaluation of Coal India's Q4 FY18 performance is crucial for investors as it reveals the true earnings power of the company. A 26.54% adjusted NPM is significantly higher than the reported figures, suggesting that the market might be underestimating its profitability. This strong underlying performance, coupled with positive triggers like government's push to reduce coal imports, could lead to a re-rating of the stock.

The primary beneficiary is COALINDIA, which could see a positive re-rating as investors digest the true profitability. The higher NPM and projected Q1 FY19 earnings of Rs 6263 crore (against FY18 annual profit of Rs 9266 crore) indicate substantial growth. This positive outlook for the largest coal producer could also indirectly benefit power generation companies (e.g., NTPC) and heavy industries that rely on coal, by ensuring stable and potentially cheaper domestic coal supply.

Traders should closely monitor Coal India's Q1 FY19 results for confirmation of the projected earnings. Key metrics to watch include offtake volumes, average realization per MT (especially from e-auctions), and any further updates on government policies regarding coal imports. A sustained high NPM and strong volume growth would reinforce the bullish thesis.

• •Coal India's Q4 FY18 reported PAT was Rs 1295 crore.
• •One-time provisions of Rs 7384 crore and other income of Rs 2000 crore impacted reported PAT.
• •Adjusted PAT for Q4 FY18 was Rs 6679 crore, leading to an adjusted NPM of 26.54%.
• •Projected Q1 FY19 sales of Rs 24089 crore based on 153.43 MT offtake and higher e-auction realizations.
• •Projected Q1 FY19 profit of Rs 6263 crore using the 26% NPM, significantly higher than FY18 annual profit of Rs 9266 crore.