Coal India - 2QFY2016 Result Update - Angel Broking

For 2QFY2016, Coal India (CIL) reported a strong 8% yoy increase in revenue to Rs. 16,958cr, in line with our estimate of Rs. 16,833cr. 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 Rs. 1,294/T. However, e-auction realizations came in much lower than expected at Rs. 1,788. Blended realization/tonne came in lower than our expectation at Rs. 1,392 (1.5% lower than our estimate of Rs. 1,414), 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 Rs. 3,008cr, 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 Rs. 2,544cr was slightly ahead of our estimate of Rs. 2,445cr.

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 CIL's 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 Rs. 380 (Rs. 400 earlier) and retain our Accumulate rating on the stock.

Shares of COAL INDIA LTD. was last trading in BSE at Rs.332.2 as compared to the previous close of Rs. 331.1. The total number of shares traded during the day was 195201 in over 2824 trades.

The stock hit an intraday high of Rs. 334.1 and intraday low of 330.5. The net turnover during the day was Rs. 64806428.

Source : Equity Bulls

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