Analyst Corner: Coal India rating – ‘buy’; dispatches fell by 10.3% y-o-y in March

Coal India’s (COAL’s) dispatches fell by10.3% y-o-y to 53.5mt in Mar’20 due to a sharp fall in demand from the power sector. On the other hand, production was up 6.5% y-o-y at 84.4mt led by growth in its key subs (SECL: +22%; MCL+6%). For FY20, dispatches were down 4% y-o-y at 582mt, while production declined by ~1% y-o-y to 602mt.

Lower power demand to impact dispatches amid inventory buildup
India’s nation-wide lockdown comes at a time when (i) power demand has largely remained muted (11MFY20: 1.5% y-o-y ) and (ii) production at COAL’s mines has been ramped up following a heavy monsoon season. Accordingly, inventories at both coal mines and power plants have risen – a general trend at the onset of summer, but higher than usual.