Coal India Ltd Q2 FY24 Earnings Conference Call Insights

Key highlights from Coal India Ltd (COALINDIA) Q2 FY24 Earnings Concall

• MCL Coal Production
  • MCL’s coal production has remained flat YTD due to land acquisition issues that halted mining operations for almost a month.
  • The company is confident of achieving its target of 204 million tons for the year as operations have resumed and MCL is now on a growth trajectory.
• BCCL Coal Production Target
  • BCCL has shown strong growth over the past 2 years and is on track to achieve its production target of 41 million tons this year with 11% growth.
  • BCCL is steadily growing month-on-month and expected to meet its goals for production, coal dispatches, and overburden removal.
• Coal Demand Outlook
  • Coal-based power generation grew 33% in October indicating continued strong demand.
  • Demand is expected to remain robust until the end of the monsoon season.
  • Regular monitoring is being done to ensure adequate coal supplies to power sector.
  • Confident of domestic coal demand until 2030 based on projections.
  • Believes COALINDIA can sell all the coal it can mine over the next 6-7 years at least.
  • Target is to reach 1 billion tons production by 2025-26.
• Efficiency Improvements
  • Efficiency gains are due to factors besides lower employee costs like improved mining operations and digitization.
  • Manpower has decreased slightly and cost per ton of production has declined by 1% as volumes increased.
  • Coal stock levels have also improved in recent months.
• Solar Power Investments
  • Subsidiaries to invest INR16,500 crores in solar power to reach 3,000 MW capacity by 2030.
  • In current year 250 MW solar capacity addition is targeted. Projects planned across multiple states.
  • Equity contribution expected to be around INR5,000-6,000 crores over next 4-5 years for the 3,000 MW solar target.
• Increased Coal Production
  • Coal production target for next fiscal is 840 million tons.
  • Share of e-auctions expected to increase from 15-20% currently to 20% or more with increased production.
  • Focus also on scaling underground mining from 25 to 100 million tons by 2030.
  • Production target for current year is 780 million tons, dispatch target also same.
  • Achieved 12% production growth and 9% dispatch growth till now.
  • Targeting to build coal stocks at power plants and own sites to enable higher dispatches.
  • Aiming for 5-6% volume growth based on monthly run-rate needed to meet targets.
• Employee Cost Savings
  • Renegotiated employee contracts to lower costs.
  • Guiding for 40% reduction in employee costs to around INR46,000 crores this year.
  • Resolving pending issues between officer and non-officer staff.
  • Connectivity Investments and Evacuation Infrastructure
  • Investing INR24,700 crores in first mile projects for pit-head to rail connectivity.
  • Expect 6-7 years payback period based on cost savings so far.
  • Reducing road transportation resulting in lower costs, higher safety and lower emissions.
  • MCL and SCCL require major evacuation capacity expansion for next year’s target.
  • Adding 25-30 million tons capacity in MCL areas and 50-60 million for SCCL.
  • New rail lines, silos, belt conveyors being constructed to enable this.
• MDO Operations
  • 1 MDO project has started production so far out of 15 planned.
  • 2 more MDOs expected to start in next 8-10 months.
  • MDO production target is 20-25 million tons in FY24-25 and 55-60 million tons in FY25-26.
  • MDOs will help reduce employee costs at subsidiaries with higher manpower.
  • MCL and NCL have lower employee costs and higher productivity due to younger mines.
• Capex Spending Allocation
  • Out of INR16,500 crores capex, land acquisition is INR2,500 crores.
  • Equipment purchase is around INR2,000 crores..
  • Looking for international partner for operations of new ship repair facilities.
• Coal Washing Investments
  • Adding 10 million tons coking washing capacity in next 2 years.
  • Around 20-30% increase in cooking coal washing capacity over next 2-3 years.
  • Will boost volumes and quality through these investments.