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India Equity Research Reports, IPO and Stock News
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● Additional disclosure and the call provide further proof of benefits
of (1) resource ownership; (2) cost cuts; & (3) high cash reserves.
● Coking Coal will now be sold at 79% of imported coal prices of the
previous quarter. At US$300/t, this implies ASP of Rs11,000, a
significant jump from base price of Rs7,400/t. With ~1.5 mt of
HCC and 2 mt of lower-grade coal, this can add ~5% to EBITDA.
● Output per man/shift rose from 4.47 in FY10 to 4.73 in FY11 –
there is significant scope for further improvement. Due to price
rise & cost efficiency, PAT/T significantly improved across most
subsidiaries; MCL (Rs260 to Rs420), ECL (0 to Rs208), CCL
(Rs242 to Rs312), SECL (Rs245 to Rs438). This should also help
lower taxes (ECL/BCCL now profitable, & have accumulated
losses). Interest income was Rs11 bn, up 66% YoY due to
improving yields on rising cash reserves.
● About half of ‘social overhead’ expenditure is welfare expenditure
(7% of 1Q profits): this has now been re-classified to give clarity.
Further, interestingly, of the total price paid by the end-consumer,
14% goes to the Govt, 38% to Railways and only 48% to CIL.
We present takeaways from additional disclosure and the call.
Key takeaways from the Annual Report
● Of the total price being paid by the end-consumer, 14% goes to
the government as various duties & royalty, 38% to the railways
and 48% to CIL. In FY11, Govt earned Rs100 bn (of which Rs48
bn was royalty).
● Output per man-shift rose from 4.47 in FY10 to 4.73 in FY11.
● Of 117 mining projects, 41 are delayed – of which 24 are due to
land acquisition problems.
● Reported social overhead (Rs22.7bn) contains a number of
elements that are non-CSR: non cash benefits for employees,
medical facilities expenditure, grants to educational institutions,
repairs etc. From 1Q12 onwards, CIL has re-allocated some of
them to other line items and has changed the line item to welfare
expenditure. While this does not impact EBITDA, it does give
more clarity on line items. Welfare expenditure was 54% of social
overheads in 1Q11.
Key takeaways from Conference Call and MDA
● Interest income was Rs11.13 bn (of total non-operating income of
Rs15.5 bn), up 66% YoY.
● Coking coal will now be sold at 79% of imported coal prices of
previous quarter. At US$300/t, this implies ASP of Rs11,000,
which is a significant jump from the base price of Rs7,400/t.
● PAT/T has improved significantly in most subsidiaries. Tax rate
could decline further (1Q: ~30%) as BCCL and ECL have turned
profit-making, tax exempt due to accumulated losses.
● E-auction prices were 73% above notified prices, up 37% YoY.
● Management is taking daily stock of rail availability, and is
confident of getting 175 rakes/day for its official target of 454 mnt.
Its internal targets are much higher (472 mnt offtake): this would
need 190 rakes/day: optimistic. We maintain our 454 mt estimate.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
● Additional disclosure and the call provide further proof of benefits
of (1) resource ownership; (2) cost cuts; & (3) high cash reserves.
● Coking Coal will now be sold at 79% of imported coal prices of the
previous quarter. At US$300/t, this implies ASP of Rs11,000, a
significant jump from base price of Rs7,400/t. With ~1.5 mt of
HCC and 2 mt of lower-grade coal, this can add ~5% to EBITDA.
● Output per man/shift rose from 4.47 in FY10 to 4.73 in FY11 –
there is significant scope for further improvement. Due to price
rise & cost efficiency, PAT/T significantly improved across most
subsidiaries; MCL (Rs260 to Rs420), ECL (0 to Rs208), CCL
(Rs242 to Rs312), SECL (Rs245 to Rs438). This should also help
lower taxes (ECL/BCCL now profitable, & have accumulated
losses). Interest income was Rs11 bn, up 66% YoY due to
improving yields on rising cash reserves.
● About half of ‘social overhead’ expenditure is welfare expenditure
(7% of 1Q profits): this has now been re-classified to give clarity.
Further, interestingly, of the total price paid by the end-consumer,
14% goes to the Govt, 38% to Railways and only 48% to CIL.
We present takeaways from additional disclosure and the call.
Key takeaways from the Annual Report
● Of the total price being paid by the end-consumer, 14% goes to
the government as various duties & royalty, 38% to the railways
and 48% to CIL. In FY11, Govt earned Rs100 bn (of which Rs48
bn was royalty).
● Output per man-shift rose from 4.47 in FY10 to 4.73 in FY11.
● Of 117 mining projects, 41 are delayed – of which 24 are due to
land acquisition problems.
● Reported social overhead (Rs22.7bn) contains a number of
elements that are non-CSR: non cash benefits for employees,
medical facilities expenditure, grants to educational institutions,
repairs etc. From 1Q12 onwards, CIL has re-allocated some of
them to other line items and has changed the line item to welfare
expenditure. While this does not impact EBITDA, it does give
more clarity on line items. Welfare expenditure was 54% of social
overheads in 1Q11.
Key takeaways from Conference Call and MDA
● Interest income was Rs11.13 bn (of total non-operating income of
Rs15.5 bn), up 66% YoY.
● Coking coal will now be sold at 79% of imported coal prices of
previous quarter. At US$300/t, this implies ASP of Rs11,000,
which is a significant jump from the base price of Rs7,400/t.
● PAT/T has improved significantly in most subsidiaries. Tax rate
could decline further (1Q: ~30%) as BCCL and ECL have turned
profit-making, tax exempt due to accumulated losses.
● E-auction prices were 73% above notified prices, up 37% YoY.
● Management is taking daily stock of rail availability, and is
confident of getting 175 rakes/day for its official target of 454 mnt.
Its internal targets are much higher (472 mnt offtake): this would
need 190 rakes/day: optimistic. We maintain our 454 mt estimate.
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