Coal India - 1QFY2013 Result Update - Angel Broking

Coal India Ltd (CIL)'s 1QFY2013 results surprised us positively due to lower-than-expected staff and other costs. Further, it remains well-poised to meet its FY2013 offtake target given a 6.5% yoy increase reported in 1QFY2013. We recommend Accumulate on the stock.

Higher volumes and realization drive net sales growth: CIL's 1QFY2013 net sales increased by 13.8% yoy to Rs.16,500cr (in line with our estimate of Rs.16,361cr) primarily due to increases in both volumes as well as average realization. Blended average realization on coal sales increased 6.8% yoy to Rs.1,461/tonne and offtake grew by 6.5% yoy to 113mn tonne.

Higher other income drives bottom line growth: The EBITDA increased by only 0.3% yoy to Rs.5,133cr due to a 25.8% yoy growth in staff costs to Rs.6,130cr (although it was below our expectations). Other income rose by 32.9% yoy to Rs.2,071cr on account of higher cash balance and increased treasury yield. Hence, the adjusted net income grew by 7.2% yoy to Rs.4,458cr (above our estimate of Rs.4,090cr).

Outlook and valuation: CIL's 1QFY2013 results surprised us positively due to lower-than-expected staff and other costs. Further, it remains well-poised to meet its FY2013 offtake target with 6.5% yoy increase reported in 1QFY2013. Moreover, an increase in blended realization due to shifting to gross calorific value (GCV)-based pricing is expected to offset the rise in staff costs in FY2013. Valuing the stock at 8.0x FY2014 EV/EBITDA, we derive a target price of Rs.385 and recommend Accumulate on the stock.

Source : Equity Bulls

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