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Coal India Ltd. | Q1FY14 Result Update




IndiaNivesh Securities Pvt Ltd


05 Aug 2013





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Coal India Ltd. | Q1FY14 Result Update Below Expectation on account of higher sale of FSA coal | Coal India reported Q1FY14 consolidated numbers below our expectations. Revenue decreased by 17% q-o-q (flat y-o-y) to Rs 164.72 bn (vs. our expectation of Rs 178.50 bn) led by lower production and lower realization (on account of higher sale of FSA coal). Production in Q1FY14 stood at 102.89MT (flat Y-o-Y and down 28% q-o-q) and dispatches stood 115 MT (up 2.1% Y-o-Y). Blended realizations (both from regulated and E-auction coal) for the June quarter stood at Rs 1,428 per tonne vs. Rs. 1,532 per tonne in Q4FY13, and Rs 1,460 in Q1FY13. Lower realization attributed to lower e-auction quantity along with lower price spot price. EBITDA margin contracted 515 bps y-o-y and 671 bps q-o-q due to increase instaff cost, power &fuel expenses, and other expenses. The company reported PAT of Rs. 37.31 bn lower than our expectation of Rs 43.76(street expectation of Rs. 42 bn) bn due to lower topline and higher staff cost (up 11% y-o-y). However, the management expects to gain in the near future from a price hike in end-May 2013, and hopes to achieve production growth targets 5.8% for the year. Valuation: We expect that lower e auction is the short term concern for the company. The company would be able to overcome with this problem shortly and to achieve higher production growth in FY 14. We forecast FY14 production at 474.8 MT (+5% YoY); of-take 488.46 MT (+5%). 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. 360.

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