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Coal India Ltd. | Q1FY13 Result | PAT Ahead of estimates




IndiaNivesh Securities Pvt Ltd


13 Aug 2012





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Coal India Ltd. | Q1FY13 Result Update | … PAT Ahead of estimates Coal India reported Q1FY13 consolidated PAT ahead of street expectation mainly due to rise in other income and lower effective tax rate. Revenue increased by 14% y-o-y to Rs 165 bn (vs. consensus of Rs. 166.79 bn) led by higher off-take and realization. During Q1FY13 production and off-take were up 6% y-o-y to 102.47 mn ton and 113.04 mn ton respectively. Blended realizations (both from regulated and E-auction coal) for the June quarter stood at Rs 1,460 per tonne vs. Rs. 1364 per tonne in Q1FY12, and Rs 1,580 in Q4FY12. Lower realization on q-o-q basis may be attributed to lower proportion of E-auction coal. PAT for the quarter came at Rs. 44.69 bn as against street estimate of Rs. 42.10 bn due to higher other income (increased by 33% y-o-y to Rs. 23.27 bn) and slightly lower effective tax rate (29.31% vs. 30.48% in Q1FY12). However, EBITDA margin contracted 406 bps y-o-y due to increase in employee cost (due to wage hike in January 2012) and overburden removal adjustment. The company has set a production target of 113 million tonnes for Q2 FY13 and 470 million tonnes for the financial year 2012-13. Valuation: Over the last couple of quarters, CIL witnessed several challenges on the policy, operational and administrative fronts. These include revised norms for environmental/forest clearances, uncertainty on mining tax/ MMDR Act, delays in land acquisition, e-auction diversion, commitment on FSA, wage negotiations, lower production due to heavy monsoon and workers’ strike etc. However, we believe that these concerns do not impact the structural long term story as 1) strong domestic coal demand; 2) monopoly in coal production in India; 3) ASP (Average selling price) significantly lower than global prices—potential for price hikes, and 4) one of the lowest cost producers globally. We maintain our buy rating on the stock with target price of Rs. 400.

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