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Coal India Ltd Research Report - 21st Jan 2016

Metals | Published on Nov 16th 2015


For 2QFY2016, Coal India (CIL) reported a strong 8% yoy increase in revenue to Rs16,958cr, in line with our estimate of Rs16,833cr. Off-take volumes were marginally ahead of our expectations at 121.8MT (our estimate was of 119.1MT). Off-take was higher in the FSA segment with e-auction and washeries volumes in line with expectations. FSA realizations were in line with expectations at Rs1,294/T. However, e-auction realizations came in much lower than expected at Rs1,788. Blended realization/tonne came in lower than our expectation at Rs1,392 (1.5% lower than our estimate of Rs1,414), led by the sharply lower e-auction realisation. Blended realisation declined 2% yoy, while off-take increased 10.2% yoy, resulting in an 8.2% increase in net sales. The EBITDA, at Rs3,008cr, came in 3.2% lower than our estimate, resulting in a 140bp improvement in EBITDA margin to 17.2%, marginally lower than our estimate of 17.9%. Net profit at Rs2,544cr was slightly ahead of our estimate of Rs2,445cr. Outlook and valuation We reduce our consolidated FY2016 and FY2017 EPS estimates by 12% and 9%, respectively, in view of the lower than expected realizations and increased operating expenses. We expect CILs production to increase by 7.1% to 530MT in FY2016 (538MT earlier) and 572MT in FY2017 (575 MT earlier). We expect eauction realization to remain under pressure led by weakness in global commodity prices and increased availability of coal in FY2016. We value Coal India at 8x FY2017E Adj. EBITDA to arrive at a revised target price of Rs380 (Rs400 earlier) and retain our Accumulate rating on the stock.

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CMP 338
Target Price 380
Investment Period12 Months

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Shareholding Pattern (%)

Public & Others1.0
Grand Total100.0

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