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UBS Investment Research
Coal India
1 QFY12 EBITDA in line; PAT higher
Event: 1QFY12 operational results in line; PAT higher than estimates
Pre-ex PAT of Rs41.4bn (-2%QoQ, +63%YoY) was higher than UBS-e/consensus
of Rs37.7bn / Rs36.4bn. EBITDA at Rs48.2bn (-7%QoQ, +55%YoY) was in line
with UBS-e/consensus of Rs48.4bn/Rs48.6bn. Net sales was marginally higher at
Rs144.99bn (-3%QoQ, +27%YoY, UBS-e/consensus of Rs144.2bn/Rs144.3bn).
PAT was higher than estimates due to lower depreciation, marginally higher other
income and lower tax rate (30.4%). EBITDA margin was 33.3% (UBS-e 33.6%).
Impact: Short term positive impact though remain cautious on the stock
While higher than expected PAT could have a short term positive impact on the
stock we remain cautious on CIL with a one year view given concerns on
execution. Sales volume was up 5%YoY to 106.25mt while ASP rose 3%QoQ to
Rs1,365/t (US$30/t). EBITDA/t was Rs454/t (US$10/t, -1%QoQ, +48%YoY).
Action: Maintain current estimates; execution/wagon supply remains key
As highlighted in our recent ‘Asia on the Ground’ note ‘What’s happening on the
execution side’ dated 28th July 2011, we remain cautious on CIL as: 1) Progress on
washeries is slow - only one out of 20 has been contracted. 2) Production /despatch
target of 452mt /477mt for FY12 could disappoint due to execution/wagon
availability issues. 3) Railway wagon ordering is delayed— Budget 2012 had
targeted 18,000 new wagons in FY12—ordering expected by Sept. 4) Delay in start
of wage negotiations (due in July). CIL is hosting an analyst meet tomorrow.
Valuation: Maintain Buy and PT of Rs400
We continue to value CIL on 15x PE on FY13E EPS & maintain our price target.
Coal India
Coal India is the largest coal company in the world (primarily thermal coal). The
government owns 90% of the company. It sells its entire output (415Mt in
FY10) in the domestic market. Coal India sells coal at a significant discount (55-
60%) to international coal prices.
Statement of Risk
Coal India is a public sector enterprise and hence, may not be able to raise coal
prices in line with input costs (given inflation concerns), negatively impacting
earnings. Coal India is expanding capacity significantly; any delay in capacity is
likely to impact earnings. Valuation: We value Coal India on 15x FY13E EPS.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Coal India
1 QFY12 EBITDA in line; PAT higher
Event: 1QFY12 operational results in line; PAT higher than estimates
Pre-ex PAT of Rs41.4bn (-2%QoQ, +63%YoY) was higher than UBS-e/consensus
of Rs37.7bn / Rs36.4bn. EBITDA at Rs48.2bn (-7%QoQ, +55%YoY) was in line
with UBS-e/consensus of Rs48.4bn/Rs48.6bn. Net sales was marginally higher at
Rs144.99bn (-3%QoQ, +27%YoY, UBS-e/consensus of Rs144.2bn/Rs144.3bn).
PAT was higher than estimates due to lower depreciation, marginally higher other
income and lower tax rate (30.4%). EBITDA margin was 33.3% (UBS-e 33.6%).
Impact: Short term positive impact though remain cautious on the stock
While higher than expected PAT could have a short term positive impact on the
stock we remain cautious on CIL with a one year view given concerns on
execution. Sales volume was up 5%YoY to 106.25mt while ASP rose 3%QoQ to
Rs1,365/t (US$30/t). EBITDA/t was Rs454/t (US$10/t, -1%QoQ, +48%YoY).
Action: Maintain current estimates; execution/wagon supply remains key
As highlighted in our recent ‘Asia on the Ground’ note ‘What’s happening on the
execution side’ dated 28th July 2011, we remain cautious on CIL as: 1) Progress on
washeries is slow - only one out of 20 has been contracted. 2) Production /despatch
target of 452mt /477mt for FY12 could disappoint due to execution/wagon
availability issues. 3) Railway wagon ordering is delayed— Budget 2012 had
targeted 18,000 new wagons in FY12—ordering expected by Sept. 4) Delay in start
of wage negotiations (due in July). CIL is hosting an analyst meet tomorrow.
Valuation: Maintain Buy and PT of Rs400
We continue to value CIL on 15x PE on FY13E EPS & maintain our price target.
Coal India
Coal India is the largest coal company in the world (primarily thermal coal). The
government owns 90% of the company. It sells its entire output (415Mt in
FY10) in the domestic market. Coal India sells coal at a significant discount (55-
60%) to international coal prices.
Statement of Risk
Coal India is a public sector enterprise and hence, may not be able to raise coal
prices in line with input costs (given inflation concerns), negatively impacting
earnings. Coal India is expanding capacity significantly; any delay in capacity is
likely to impact earnings. Valuation: We value Coal India on 15x FY13E EPS.
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