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| India Infoline Research Team / 11:51 , Feb 14, 2012 |
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CMP Rs336, Target Rs353, Upside 5.0%
- Topline of Rs153.5bn was marginally lower than our estimate of Rs154.5bn due to lower coal sales volume
- Offtake during the quarter stood at 110.3mn tons, lower than our estimate of 112mn tons and 110.5mn tons in Q3 FY11
- Realisations declined 0.8% qoq to Rs1,392/ton due to lower e-auction sales
- Employee costs surprisingly declined 1.2% qoq to Rs56.2bn, quite lower than our estimate of Rs59bn
- EBIDTA/ton increased from Rs305.5 in Q3 FY11 and Rs264 in Q2 FY12 to Rs412, higher than our estimate of Rs396
- Maintain our Market Performer rating with a 9-month price target of Rs353
Result table
| (Rs mn) |
Q3 FY12 |
Q3Y11 |
% qoq |
Q2FY12 |
% yoy |
| Net sales |
153,493 |
126,919 |
20.9 |
131,481 |
16.7 |
| Inc/(dec) in inventory |
513 |
1,521 |
(66.2) |
(5,579) |
- |
| Material costs |
(14,064) |
(13,535) |
3.9 |
(12,332) |
14.0 |
| Personnel costs |
(56,221) |
(45,001) |
24.9 |
(56,907) |
(1.2) |
| Contractual expenses |
(12,484) |
(11,473) |
8.8 |
(9,645) |
29.4 |
| Overburden removal |
(7,609) |
(6,939) |
9.7 |
(4,363) |
74.4 |
| Other overheads |
(18,208) |
(17,733) |
2.7 |
(17,882) |
1.8 |
| Operating profit |
45,421 |
33,760 |
34.5 |
24,773 |
83.3 |
| OPM (%) |
29.6 |
26.6 |
299 bps |
18.8 |
1,075 bps |
| Depreciation |
(5,257) |
(4,136) |
27.1 |
(5,734) |
(8.3) |
| Interest |
(76) |
(285) |
(73.3) |
(83) |
(8.3) |
| Other income |
18,559 |
12,876 |
44.1 |
17,942 |
3.4 |
| PBT |
58,647 |
42,214 |
38.9 |
36,898 |
58.9 |
| Tax |
(18,322) |
(15,796) |
16.0 |
(11,132) |
64.6 |
| Effective tax rate (%) |
31.2 |
37.4 |
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30.2 |
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| Adjusted PAT |
40,325 |
26,419 |
52.6 |
25,766 |
56.5 |
| Adj. PAT margin (%) |
26.3 |
20.8 |
546 bps |
19.6 |
668 bps |
| Extra ordinary items |
52 |
(158) |
- |
165 |
(68.4) |
| Reported PAT |
40,378 |
26,261 |
53.8 |
25,931 |
55.7 |
| Ann. EPS (Rs) |
25.5 |
16.7 |
52.6 |
16.3 |
56.5 | Source: Company, India Infoline Research
Coal sales volume lower than our estimate
Q3 FY12 revenue of Rs153.5bn was 20.9% higher on a yoy basis and 16.7% on a qoq basis. However, topline was lower than our estimate of Rs154.5bn due to lower coal offtake. Coal off take during the quarter was lower by 0.2% on a yoy basis even though production increased 0.6% yoy. We had estimated coal off take volumes at 112mn tons. The impact of lower volumes on topline was lowered by higher than expected realizations. We had estimated realizations to decline from Rs1,402/ton in Q2 FY12 to Rs1,380/ton on the back of lower e-auction sales. However, the company managed to report realizations of Rs1,392/ton during the quarter.
EBIDTA/ton increased to Rs412
Operating profit for the quarter surged 34.5% yoy to Rs45.4bn on the back of improved realisations. EBIDTA/ton in Q3 FY12 stood at Rs412, higher by 34.8% on a yoy basis and 55.8% on a qoq basis. The improvement in EBIDTA/ton was largely on account of higher realisations, as cost too was up 16.2% yoy. On a qoq basis, costs declined 13.9% on the back of higher volumes and marginally lower employee costs. Employee costs surprisingly declined 1.2% qoq to Rs56.2bn, quite lower than our estimate of Rs59bn. Overburden removal costs and contractual expenses increased on a qoq basis.
Per ton analysis
| |
Q3 FY12 |
Q3 FY11 |
% yoy |
Q2 FY12 |
% qoq |
| Production (mn tons) |
114.6 |
113.9 |
0.6 |
80.3 |
42.7 |
| Dispatches (mn tons) |
110.3 |
110.5 |
(0.2) |
93.7 |
17.6 |
| Realisation (Rs/ton) |
1,392.0 |
1,148.6 |
21.2 |
1,402.8 |
(0.8) |
| Costs/ton (Rs/ton) |
980.1 |
843.1 |
16.2 |
1,138.5 |
(13.9) |
| EBIDTA/ton (Rs/ton) |
411.9 |
305.5 |
34.8 |
264.3 |
55.8 | Source: Company, India Infoline Research
Other income remains strong at 30% of PBT
The growth in PAT in was higher than that of operating profit due to a sharp jump in other income. Other income of Rs18.6bn was 44% higher on a yoy basis and 3.4% on a yoy basis. Tax rate for the quarter was 31.2%, inline with the company’s guidance. PAT of Rs40.4bn was higher than our estimate of Rs37.3bn due to lower employee costs.
Maintain Market Performer rating
Coal India has traded sideways over the last one month as concerns over its ability to raise prices increased. The issues related to wage negotiations are behind us and would reduce the uncertainty over the stock in the near term. As Coal India passes through a phase wherein key policy developments relating to the power sectors are in the offing, the actual impact of recently concluded wage revisions and clarity over the GCV-based pricing structure, we maintain our Market Performer rating on the stock. We believe that the company would not be able to pass the complete increase in employee costs by raising prices for coal meant for the power sector. On account of the lack of positive triggers in the near term, we maintain our Market Performer rating on the stock with a 9-month price target of Rs353.
Financial summary
| Y/e 31 Mar (Rs m) |
FY11 |
FY12E |
FY13E |
FY14E |
| Revenues |
514,931 |
616,435 |
665,530 |
710,733 |
| yoy growth (%) |
12.1 |
19.7 |
8.0 |
6.8 |
| Operating profit |
146,973 |
195,556 |
222,420 |
242,576 |
| OPM (%) |
28.5 |
31.7 |
33.4 |
34.1 |
| Pre-exceptional PAT |
109,275 |
151,106 |
172,125 |
189,199 |
| Reported PAT |
108,674 |
151,106 |
172,125 |
189,199 |
| yoy growth (%) |
12.9 |
39.0 |
13.9 |
9.9 |
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| EPS (Rs) |
17.3 |
23.9 |
27.3 |
30.0 |
| P/E (x) |
19.4 |
14.0 |
12.3 |
11.2 |
| Price/Book (x) |
6.4 |
4.9 |
3.8 |
3.1 |
| EV/EBITDA (x) |
11.4 |
7.9 |
6.4 |
5.4 |
| RoE (%) |
36.9 |
39.2 |
34.7 |
30.5 |
| RoCE (%) |
52.8 |
56.5 |
50.5 |
44.8 | Source: Company, India Infoline Research
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