Coal India - 4QFY2015 Result Update - Angel Broking

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 Rs. 2,387 (3% below our estimate of Rs. 2,464). FSA realization/tonne came in much ahead of our expectations at Rs. 1,408, vs our estimate of Rs. 1,300. 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 Rs. 5,399cr was ahead of our expectations of Rs. 5,226cr.

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 Rs. 425 and retain our Accumulate rating on the stock.

Shares of COAL INDIA LTD. was last trading in BSE at Rs.405.6 as compared to the previous close of Rs. 388.35. The total number of shares traded during the day was 952459 in over 13876 trades.

The stock hit an intraday high of Rs. 409.7 and intraday low of 391.1. The net turnover during the day was Rs. 386651091.

Source : Equity Bulls

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