Analyst Research Report Snapshot


Coal India (COAL) - Qtr. Update - Dated - May 30, 2014




Axis Capital Limited


31 May 2014





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Coal India’s (Bloomberg: COAL IN) Q4 EBITDA at Rs 69.8 bn (flat YoY) was above our estimate of Rs 65 bn mainly due to higher realizations. Average realization/ton improved 7% QoQ to Rs 1,539 due to higher than expected incentive from power companies (Rs 8bn vs. Rs 3bn expected). The company receives incentives for supplying coal in excess of FSA commitment, which is usually taken in Q4. FY14 incentive was Rs 8 bn (Rs 13 bn in FY13). The company expects this to decline going forward as it steps up supplies to recently commissioned power plants. Faster clearances to provide volume growth in medium to long term:  The company expects additional volumes of 30 mnt (6% YoY growth) in FY15 and 90 mnt over next 3 years (CAGR of 6%). Additionally, in case it is able to (a) expedite clearances and (b) complete the critical rail projects it is working on, the company believes it can increase production by 150 mnt in 3 years (vs. base case increase by 90 mnt)  We retain our FY15 volume growth assumption at 4.5% but raise that of FY16 to 7% (vs 4.5% earlier). We also raise our long term growth assumption to 3% (vs 2% earlier) led by potentially faster clearances and improvement in logistics bottlenecks We retain our EPS estimate for FY15 at Rs 29 while raise that of FY16 to Rs 33 (Rs 31 earlier) led by higher volume growth assumption. We upgrade the stock to BUY (from HOLD) with revised DCF-based target price of Rs 440 (Rs 292 earlier). Our target price implies an upside of 19% from CMP of Rs 371. Regards, Jagdishwar Toppo (Executive Director – Materials); 91 22 4325 1103 Nitesh Jain (Sr VP – Materials); 91 22 4325 1145 Sujan Sanisetty (VP – Materials); 91 22 4325 1122

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