Coal India Ltd (Q3 FY13)

India Infoline News Service | Mumbai |

Realisations for the quarter increased marginally by 0.5% qoq to Rs1,438/ton against our expectation of Rs1,410. We were positively surprised by the increase in average realizations for the quarter.

CMP Rs348, Target Rs356, Upside 2.4%

  • Topline surges 19% on account of higher than expected realisations
  • Offtake during the quarter increased by 18.4% qoq to 120.5mn tons, production too was higher by 32% qoq
  • Realisations for the quarter increased marginally by 0.5% qoq to Rs1,438/ton against our expectation of Rs1,410. We were positively surprised by the increase in average realizations for the quarter.
  • EBIDTA/ton increased from Rs281 in Q2 FY13 to Rs356, lower than our estimate of Rs381 due to a jump in social overheads and higher diesel prices
  • PAT increases 43% qoq and 9% yoy to Rs43.9bn led by a 27.2% jump in other income
  • Maintain Market Performer rating with a 9-month price target of Rs356 

Result table

(Rs mn) Q3 FY13 Q2 FY13 % qoq Q3 FY12 % yoy
Net sales 173,250 153,493 12.9 145,725 18.9
Inc/(dec) in inventory (2,713) 513 - (6,486) (58.2)
Material costs (15,475) (14,064) 10.0 (12,566) 23.1
Personnel costs (63,050) (56,221) 12.1 (65,364) (3.5)
Contractual expenses (14,858) (12,484) 19.0 (10,917) 36.1
Overburden removal (9,070) (7,609) 19.2 (6,741) 34.6
Other overheads (25,201) (18,208) 38.4 (15,034) 67.6
Operating profit 42,883 45,421 (5.6) 28,617 49.9
OPM (%) 24.8 29.6 (484) bps 19.6 511 bps
Depreciation (4,204) (5,257) (20.0) (3,872) 8.6
Interest (96) (76) 26.3 (102) (6.2)
Other income 23,605 18,559 27.2 20,929 12.8
PBT 62,188 58,647 6.0 45,571 36.5
Tax (18,387) (18,322) 0.4 (14,703) 25.1
Effective tax rate (%) 29.6 31.2   32.3  
Adjusted PAT 43,801 40,325 8.6 30,869 41.9
Adj. PAT margin (%) 25.3 26.3 (99) bps 21.2 410 bps
Extra ordinary items 151 52 188.5 (88) -
Reported PAT 43,951 40,378 8.9 30,781 42.8
Ann. EPS (Rs) 27.7 25.5   8.6 19.5   41.9
Source: Company, India Infoline Research

Topline jumps 19% on higher coal offtake
Coal India’s revenue increased 19% qoq and 13% yoy to Rs173.3bn which was higher than our estimate of Rs166.4bn. The increase in revenue was led by higher than expected realisations. Coal offtake increased 18.4% qoq to 120.45mn tons on account of increased availability of rakes due to better co-ordination with the railways which resulted in better coal offtake. An average of 190.3 rakes per day was loaded in Q3 FY13 against 171.8 rakes per day during Q2 FY12, an increase of 10% yoy. Realisations for the quarter stood at Rs1,438/ton marginally higher qoq. It was quite higher than our estimate of Rs1,410/ton. We believe the outperformance was due to an increase of higher market linked sales. Coal production growth too was quite strong at 31.8% qoq and 2.4% yoy to 117.4mn tons.

EBIDTA/ton increases qoq due to higher volumes and lower employee costs
Operating profit increased ~50% qoq to Rs42.9bn, but was lower by 5.6% yoy and also lower than our estimate of Rs44.9bn. CIL’s operating margin expanded by 511bps qoq, but shrunk 484bps yoy. Operating costs increased 11.3% qoq to Rs130.4bn on account of higher stores and spares and other expenses. Stores and spares per ton of coal jumped 4% qoq due to an increase in diesel prices. However, production costs per ton decreased 6% qoq on account of a decline in employee and fixed costs. Employee costs per ton decreased 18.6% qoq while fixed costs per ton declined 8% qoq. EBITDA/ton was 26.5% higher on a qoq basis at Rs356 but was 13.6% lower on a yoy basis.

Performance analysis

Q3 FY13 Q2 FY13 % yoy Q3 FY12 % qoq
Production (mn tons) 117.4 114.6   2.4 89.1   31.8
Dispatches (mn tons) 120.5 110.3   9.3 101.7   18.4
Realisation (Rs/ton) 1,438 1,392   3.3 1,432   0.4
Costs/ton (Rs/ton) 1,082 980   10.4 1,151   (6.0)
EBIDTA/ton (Rs/ton) 356 412   (13.6) 281   26.5
Source: Company, India Infoline Research

Lack of positive triggers in the near term; maintain Market Performer
Coal India over the past one quarter has overcome many hurdles ranging from employee wage revision, FSA signing and penalty clause over non-fulfilment of FSAs signed. The board is yet to finalise on the price pooling mechanism for the power producers due to opposition by a few large power players. We estimate volume growth to remain subdued in FY14 due to issues related to transportation of coal. Lack of positive triggers in the near term, maintain our Market Performer rating on the stock with a 9-month price target of Rs356.

Financial Summary
Y/e 31 Mar (Rs m) FY12 FY13E FY14E FY15E
Revenues 624,154 679,657 723,410 751,442
yoy growth (%) 24.3
BSE 271.05 7.95 (3.02%)
NSE 271.00 8.15 (3.10%)

***Note: This is a NSE Chart

 

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