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Coal India Q3FY13 First Cut Analysis | Decent performance




IndiaNivesh Securities Pvt Ltd


14 Feb 2013





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 First Cut Analysis Coal India Q3FY13 First Cut Analysis | Decent performance Coal India reported Q3FY13 consolidated numbers ahead of street expectations. The company reported PAT of Rs. 43.95 bn higher than street estimate of Rs. 41.69 bn and in line with our expectation of Rs 44.33 bn due to higher other income (up 27% y-o-y and 13% q-o-q). Revenue increased by 13% y-o-y to Rs 173.25 bn (vs. street expectation of Rs. 170.08 bn, our expectation was at Rs 171.88 bn) led by higher off-take and realization. During Q3FY13 production and off-take were up 2% y-o-y to 117.37 mn ton and 9% y-o-y to 120.45 mn ton respectively. Blended realizations (both from regulated and E-auction coal) for the December quarter stood at Rs 1,441 per tonne vs. Rs. 1,432 per tonne in Q2FY13, and Rs 1392 in Q3 FY12. Higher realization attributed to higher e-auction price per tonne which increased by 6% y-o-y to Rs. 2647 per ton. However, e auction Coal volume fell by 9% y-o-y and remain flat q-o-q to 10.4 MT. EBITDA margin contracted 487 bps y-o-y due to increase in power and fuel expenses, overburden removal adjustment and welfare & contractual expenses. 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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