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Coal India’s (CIL) 2QFY2012 results were below our expectations on account of
lower-than-expected sales volumes. We have a Neutral view on the stock.
Higher realization aids net sales growth: CIL’s net sales increased by 12.7% yoy
to `13,148cr (slightly below our estimate of `13,774cr), primarily due to
increased average realization, partially offset by lower sales volumes. Blended
average realization on coal sales grew by 19.0% yoy to `1,403/tonne; however,
sales volumes decreased by 5.3% yoy to 94mn tonnes. Production decreased by
11.3% yoy to 80mn tonnes on account of heavy rainfall in Central India.
Other income boosts bottom-line growth: EBITDA per tonne increased by 56.2%
yoy to `293 in 2QFY2012 on account of higher realization. The company’s
EBITDA increased by 47.9% yoy to `2,750cr, representing EBITDA margin of
20.9%. Other income grew by 55.0% yoy to `1,794cr on account of higher cash
balance and increased treasury yield. Adjusted net income grew by 73.1% yoy to
`2,588cr (below our estimate of `3,164cr).
Outlook and valuation: We expect CIL’s volume growth to remain muted in the
wake of stricter government regulations on mining companies. Also, we believe
any further chances of rise in coal prices by CIL will be only in case its wage
revisions exceed its estimates. At the CMP, the stock is trading at 8.8x FY2012E
and 8.0x FY2013E EV/EBITDA. We believe the current price level fairly discounts
the robust business model and steady volume growth over the medium term.
Hence, we recommend Neutral on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Coal India’s (CIL) 2QFY2012 results were below our expectations on account of
lower-than-expected sales volumes. We have a Neutral view on the stock.
Higher realization aids net sales growth: CIL’s net sales increased by 12.7% yoy
to `13,148cr (slightly below our estimate of `13,774cr), primarily due to
increased average realization, partially offset by lower sales volumes. Blended
average realization on coal sales grew by 19.0% yoy to `1,403/tonne; however,
sales volumes decreased by 5.3% yoy to 94mn tonnes. Production decreased by
11.3% yoy to 80mn tonnes on account of heavy rainfall in Central India.
Other income boosts bottom-line growth: EBITDA per tonne increased by 56.2%
yoy to `293 in 2QFY2012 on account of higher realization. The company’s
EBITDA increased by 47.9% yoy to `2,750cr, representing EBITDA margin of
20.9%. Other income grew by 55.0% yoy to `1,794cr on account of higher cash
balance and increased treasury yield. Adjusted net income grew by 73.1% yoy to
`2,588cr (below our estimate of `3,164cr).
Outlook and valuation: We expect CIL’s volume growth to remain muted in the
wake of stricter government regulations on mining companies. Also, we believe
any further chances of rise in coal prices by CIL will be only in case its wage
revisions exceed its estimates. At the CMP, the stock is trading at 8.8x FY2012E
and 8.0x FY2013E EV/EBITDA. We believe the current price level fairly discounts
the robust business model and steady volume growth over the medium term.
Hence, we recommend Neutral on the stock.
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