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Coal India 3QFY2013 performance highlights and results update

Contributed by Angel Broking

Coal India’s (CIL) 3QFY2013 results were above our expectations on account of higher-than-expected sales volumes. We maintain our Accumulate rating on the stock.

Offtake beats our expectations: Coal India’s 3QFY2013 net sales grew by 12.9% yoy to Rs.17,325cr. Sales volumes stood at 120mn tonne (our estimate was of 112mn tonne), indicating the company’s focus on increasing offtake. Railway rakes availability stood at 214/day (CIL’s requirements currently stand at 234/day). Realizations grew by 3.4% yoy and were flat qoq to Rs1,438/tonne. Higher costs dent EBITDA: Despite 12.9% top-line growth, the company’s EBITDA decreased by 4.3% yoy to Rs.5,395cr, mainly due to higher power and fuel costs and other expenses. The adjusted net profit stood at Rs.4,410cr (+9.1% yoy), above our estimate of Rs.3,808cr.

Outlook and valuation: CIL’s 3QFY2013 net profit growth was driven by higher volumes. Its sales volumes grew by 8.0% yoy during 9MFY2013, indicating its focus on increasing offtake. Also, CIL has demonstrated strong pricing power by increasing prices of coal to offset rising costs. On the price pooling front, we expect price pooling to be revenue-neutral for CIL in case it imports coal to meet the demand of power producers. Valuing the stock at 8.0x FY2014E EV/EBITDA, we derive a target price of Rs.369 and maintain our Accumulate rating on the stock.