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Coal India Ltd. (COAL.BO)
Neutral Equity Research
In line with expectations: Price hike remains the key; Neutral
What surprised us
Coal India reported FY11 consolidated net income of Rs108.7bn (+13%
yoy), in line with our estimates. Revenue stood at Rs502.3bn (+12.6% yoy)
on higher offtake of 424 mn ton (+2% yoy) and better average realisations
(+10.3% yoy), which were driven by better prices realised through the eauction route and beneficiated coal. Adjusted EBITDA stood at Rs160.8bn
(up 20.8% yoy), and employee costs were Rs182bn (46% of total
expenses). Constrained by logistics availability, inventory at the end of
FY11 stood at about 70 mn ton (16.5% of FY11 sales volume), with 3
subsidiaries (BCCL, CCL, and MCL) accounting for 80% of the inventory.
What to do with the stock
We believe Coal India is well positioned to benefit from rising power sector
coal demand and the widening coal deficit in India. However, in our view,
upside from current levels could depend on the company’s ability to raise
notified coal prices sold to the power sector. In an inflationary environment,
this appears difficult to achieve, in our view. At 8.8X FY12E EV/EBITDA, the
stock trades at a 15% premium to global peers, which we believe is justified
given its first quartile cash returns, stable cash flows, strong balance sheet
with net cash of about US$9.8bn, and near monopoly in a tight domestic
market. We fine-tune our FY12E-13E EPS and reiterate our Neutral rating, as
well as our 12-month Director’s Cut-based target price of Rs405. Key risks:
Inadequate logistics availability, regulatory delays
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Coal India Ltd. (COAL.BO)
Neutral Equity Research
In line with expectations: Price hike remains the key; Neutral
What surprised us
Coal India reported FY11 consolidated net income of Rs108.7bn (+13%
yoy), in line with our estimates. Revenue stood at Rs502.3bn (+12.6% yoy)
on higher offtake of 424 mn ton (+2% yoy) and better average realisations
(+10.3% yoy), which were driven by better prices realised through the eauction route and beneficiated coal. Adjusted EBITDA stood at Rs160.8bn
(up 20.8% yoy), and employee costs were Rs182bn (46% of total
expenses). Constrained by logistics availability, inventory at the end of
FY11 stood at about 70 mn ton (16.5% of FY11 sales volume), with 3
subsidiaries (BCCL, CCL, and MCL) accounting for 80% of the inventory.
What to do with the stock
We believe Coal India is well positioned to benefit from rising power sector
coal demand and the widening coal deficit in India. However, in our view,
upside from current levels could depend on the company’s ability to raise
notified coal prices sold to the power sector. In an inflationary environment,
this appears difficult to achieve, in our view. At 8.8X FY12E EV/EBITDA, the
stock trades at a 15% premium to global peers, which we believe is justified
given its first quartile cash returns, stable cash flows, strong balance sheet
with net cash of about US$9.8bn, and near monopoly in a tight domestic
market. We fine-tune our FY12E-13E EPS and reiterate our Neutral rating, as
well as our 12-month Director’s Cut-based target price of Rs405. Key risks:
Inadequate logistics availability, regulatory delays
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