We recently met officials from Ministries of Coal, Mines and Railways as well as coal and steel industry experts. Common themes that emerged post discussions were: (i) coal and mineral production set to increase as constraints of mining approvals and railway logistics are easing; and (ii) expect multiple policy/regulatory reforms (new mining bill, policy for investment in railways, Coal Regulator Bill, auction of coal blocks). We believe Coal India’s (COAL) FY13 dispatches could surprise positively at 470mt against our estimate of 450mt. COAL is one of our top picks in the metals & mining universe.
��
Coal Ministry: Focus on production; price hike ruled out
Ministry of Coal is seeing that mining approvals’ issue is gradually being redressed creating grounds for increased coal production (FY13 target of 465mt expected to be met). A price hike is ruled out currently. Ministry also working on a Coal Regulator which will: (i) create framework for coal pricing; (ii) enable level-playing field for private and public sector participants; and (iii) evolve coal block allocation mechanism.
Mines Ministry: Mining bill in final stages of internal discussions
The Standing Committee has deliberated on stakeholder feedback on the new mining bill and it is in final stages of internal discussions, with the probability of its adoption in FY13. Key updates: mining bill may propose approvals largely at state level (with minimal MOEF role) and mining tax may be diluted and/or provisions introduced for further review. The Mines Ministry expects restart of iron ore mining in Karnataka in coming months and no further changes to current export policy are anticipated.
Railways Ministry: Volume constraints resolved
The Ministry of Railways exuded confidence of achieving 9% YoY growth in FY13 dispatches for COAL (incremental 40mtpa) with significant jump in wagon procurement. Railways expects only 10mt incremental coal imports in FY13 in its dispatch plan. For cement and steel, it expects dispatch growth of 7.0% and 4.5%, respectively, considering weak demand. A revised, more attractive policy to invest in railway lines is expected in coming months; a similar policy for private railway sidings has already attracted 27 proposals.
Outlook & valuations: COAL to benefit
We see upside possibilities to our FY13E sales volume of 450mt for COAL. Its FY14E EPS could get upgraded by ~7% if railways’ dispatch targets are met. We remain positive on COAL (BUY/SO) with a price target of INR430 (CMP: INR340).
Regards,
No comments:
Post a Comment