Coal India Ltd (NSE:COALINDIA) (BSE:533278)

Coal India Limited (CIL) is an Indian state-controlled coal mining company headquartered in Kolkata, West Bengal, India.

Official website: www.coalindia.in

E-auction volumes and FSA realizations ahead of expectations Coal India (CIL) reported a 10.3% increase in e-auction volumes at 13.9MT, 15% higher than our estimate of 12.1MT. Realization/tonne was marginally below our expectation at Rs2,387 (3% below our estimate of Rs2,464). FSA realization/tonne came in much ahead of our expectations at Rs1,408, vs our estimate of Rs1,300. Blended realization remained flat (0.2%) on a yoy basis, while total offtake for the quarter increased 3.7%, leading to a 3.9% jump in revenues (2.9% ahead of our estimate). EBITDA margin increased 45bp yoy to 26% as higher staff costs and contractual expenses were offset by revenue growth and lower material and provisioning expenses. EBITDA at Rs5,399cr was ahead of our expectations of Rs5,226cr. Volume growth to drive revenues The Coal Ministry is making all efforts to resolve issues related to various mining projects. For the first time, the government has drawn mine-wise plans to help CIL achieve production targets. The government is also showing strong signs of acting swiftly on important reforms, such as land acquisition. Although, we do not expect a production growth target of ~13% (CAGR) over FY2015-20, we expect CIL to achieve a CAGR of ~8% to reach production levels of ~780MT by FY2020. Outlook and valuation We raise our consolidated FY2016 and FY2017 EPS estimates by 2.9% and 3.7%, respectively, in view of the better than expected increase in realizations and cost absorption. We expect CIL’s production to increase 7.9% to 533MT in FY2016 and 573MT in FY2017. We expect offtake from the power sector to lag production growth in FY2016, leading to increased e-auction volumes. E-auction realization may remain low, owing to increased volumes. We value Coal India at 8x FY2017E Adj. EBITDA to arrive at our target price of Rs425 and retain our Accumulate rating on the stock.

Source: http://www.angelbroking.com

For 1QFY2016, Coal India (CIL) reported a strong 12% yoy increase in production to 121.3MT as against our expectation of 118MT for the quarter. Ofttake volumes were also ahead of estimates at 129.4MT as against our estimate of 125.6MT. E-auction volumes at 16MT were 16% higher than our estimate of 13.8MT, while FSA volumes were in line with our estimate at 109MT. Blended realization/tonne came in lower than our expectation at Rs1,465 (3.8% below our estimate of Rs1,523), led by lower FSA as well as e-auction realisation. FSA realization/tonne was Rs1,318 vs our estimate of Rs1,373, while e-auction realisation was Rs2,184 as against our expectation of Rs2,343. Blended realisation remained flat on a yoy basis, resulting in a 6.5% increase in net sales. CIL reported net sales of Rs18,956cr for the quarter, ie lower than our estimate by 0.9%. Led by the sharp increase in expenses, the EBITDA margin declined 93bp yoy to 23.1%. The EBITDA at Rs4,382cr was 12.1% below our expectation of Rs4,984cr. Lower other income was partially offset by lower than expected depreciation and tax expense, resulting in a net profit of Rs3787cr, vs our estimate of Rs4,499cr. Outlook and valuation We reduce our consolidated FY2016 and FY2017 EPS estimates by 7.9% and 8.2%, respectively, in view of the better lower than expected realizations and increased operating expenses. We expect CIL’s production to increase 8.9% to 538MT in FY2016 and 575MT in FY2017. We expect e-auction realizations to come under pressure from increased availability of coal in FY2016. We value Coal India at 8x FY2017E Adj. EBITDA to arrive at a target price of Rs400 and retain our Accumulate rating on the stock.

Source: http://www.angelbroking.com/