Coal India - 4QFY2013 Result Update - Angel Broking

Coal India's (CIL) 4QFY2013 results were above our expectations on account of higher-than-expected sales volumes. We maintain our Accumulate rating on the stock.

Higher volumes aided net sales growth: CIL's 4QFY2013 net sales grew by 2.5% yoy to Rs. 19,905cr due to higher volumes. Sales volumes stood at 130mn tonne, indicating the company's focus on increasing offtake. Realizations were however flat yoy but grew 6.4% qoq to Rs. 1,531/tonne.

Lower staff costs and social overheads boost EBITDA: The company's EBITDA increased by 19.6% yoy to Rs. 7,490cr, mainly due to lower employee costs and social overheads. However, the other income declined by 5.2% yoy to Rs. 2,207cr and the tax rate also jumped to 28.0% in 4QFY2013 compared to 22.5% in 4QFY2012. Hence the adjusted net profit declined by 8.9% yoy to Rs. 5,436cr (above our estimate of Rs. 4,376cr).

Outlook and valuation: CIL's stock price has underperformed over the past one year on news flows related to further divestment in CIL by the government. However, CIL has demonstrated strong pricing power by increasing prices of coal to offset rising costs (including price hike taken in 4QFY2013). On the price pooling front, we expect the same to be revenue-neutral for CIL in case it imports coal to meet the demand of power producers. Hence, valuing the stock at 6.5x FY2015E EV/EBITDA, we derive a target price of Rs. 343 and maintain our Accumulate rating on the stock.

Source : Equity Bulls

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