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Coal India Limited
2Q profit hit by wage hike
2Q profit miss on higher costs; cut EPS & PO, Neutral
Profit grew 51%YoY (-38%QoQ) to Rs25.8bn vs. our Rs27.4bn est. EBITDA was
Rs24.8bn (+32%YoY) vs. our Rs27.5bn est. ASP was ahead & vols. were weak as
expected but higher wage cost & other expenses led to lower PAT. We have cut our
FY12-13E EPS by 4% & PO to Rs370 as we cut our vol. est. by 3.5% & lift our ASP
& wage cost est. CIL is likely pricing in lower volumes to some extent, but we see
limited upside triggers as CIL is likely to miss FY12 target & news flow around wage
negotiations will likely remain an overhang. Hence our Neutral rating.
Volume in line, ASP 3% ahead but wage cost higher
EBITDA pre OBR was Rs29.1bn (+31%YoY, 8% below est.) 2Q coal off take was
93.7mt (-5%YoY) vs. output of 80.3mt (-11%YoY) as vols. were hit by heavy rains
& internal logistics issues including transporting coal to coal loading point. ASP
grew 3%QoQ to Rs1403/t. This may be led by higher e-auction revenues. Wage
cost grew 17%QoQ (19% YoY, 7% ahead) as CIL started providing for wage
hikes. 2Q wage cost run rate implies a 20%YoY wage cost increase in FY12.
Off take to improve in 2H, but FY12 target to be missed
Volumes have improved in Oct, but CIL is unlikely to achieve19%YoY off take
growth over the remaining months in FY12 required to meet its FY12 off take
target (454mt). Rake availability has been adequate YTD, but may constrain coal
offtake in 4Q when output ramps up (over 200 rakes/day needed to meet target).
We cut offtake est. for FY12 to 439mt (3.5%YoY) & for FY13 to 462mt (5.3%YoY).
E-auction has resumed in Nov
E-auction was on hold in Oct & Oct e-auction quota (4mt) was offered to power
cos at notified prices to ease coal shortage. E-auction has resumed in November.
Though some coal (carry forward quantity from Oct quota) may be earmarked for
power companies, we understand pricing will be thru e-auction.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Coal India Limited
2Q profit hit by wage hike
2Q profit miss on higher costs; cut EPS & PO, Neutral
Profit grew 51%YoY (-38%QoQ) to Rs25.8bn vs. our Rs27.4bn est. EBITDA was
Rs24.8bn (+32%YoY) vs. our Rs27.5bn est. ASP was ahead & vols. were weak as
expected but higher wage cost & other expenses led to lower PAT. We have cut our
FY12-13E EPS by 4% & PO to Rs370 as we cut our vol. est. by 3.5% & lift our ASP
& wage cost est. CIL is likely pricing in lower volumes to some extent, but we see
limited upside triggers as CIL is likely to miss FY12 target & news flow around wage
negotiations will likely remain an overhang. Hence our Neutral rating.
Volume in line, ASP 3% ahead but wage cost higher
EBITDA pre OBR was Rs29.1bn (+31%YoY, 8% below est.) 2Q coal off take was
93.7mt (-5%YoY) vs. output of 80.3mt (-11%YoY) as vols. were hit by heavy rains
& internal logistics issues including transporting coal to coal loading point. ASP
grew 3%QoQ to Rs1403/t. This may be led by higher e-auction revenues. Wage
cost grew 17%QoQ (19% YoY, 7% ahead) as CIL started providing for wage
hikes. 2Q wage cost run rate implies a 20%YoY wage cost increase in FY12.
Off take to improve in 2H, but FY12 target to be missed
Volumes have improved in Oct, but CIL is unlikely to achieve19%YoY off take
growth over the remaining months in FY12 required to meet its FY12 off take
target (454mt). Rake availability has been adequate YTD, but may constrain coal
offtake in 4Q when output ramps up (over 200 rakes/day needed to meet target).
We cut offtake est. for FY12 to 439mt (3.5%YoY) & for FY13 to 462mt (5.3%YoY).
E-auction has resumed in Nov
E-auction was on hold in Oct & Oct e-auction quota (4mt) was offered to power
cos at notified prices to ease coal shortage. E-auction has resumed in November.
Though some coal (carry forward quantity from Oct quota) may be earmarked for
power companies, we understand pricing will be thru e-auction.
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