Coal India: PMO moves to expedite ‘green nod’ for projects :Nomura research

What’s new – PMO directs MoEF to grant clearance to 12 projects
As per a news report from Press Trust of India (PTI), post a meeting
convened by the Prime Minister’s Office (PMO) with the Environment
Ministry (MoEF), Coal India (CIL) and Ministry of Coal (MoC) to review
the status of 12 projects of CIL, where production is proposed to be
raised by 25%:

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 The PMO has directed the MoEF to grant clearances to these projects
within 3-4 months; progress would be monitored on a monthly basis.
 The permission to raise production from these projects by 25% would
augment output by 10mtpa.
 However, the MoEF has not relaxed the prerequisite of a public
hearing (meeting of all stakeholders, including villagers of the area to
be affected) prior to the grant of the environment/forest approval.
Implication – Signal of intent to expedite clearances is a positive
 Feedback from our interaction with policymakers and CIL over the past
three months has consistently indicated a 3QFY12 timeline for MoEF
awarding clearances for critical projects of CIL. In this context, PMO’s
push to MoEF to expedite the ‘green nod’ for CIL’s expansion projects
was imminent, in our view.
 Notwithstanding, the non-exemption from ‘public hearing’ prior to the
‘green nod’ (which arguably leaves the door open for delay in granting
clearances) for the 12 projects, we view this signal of intent to expedite
clearances is a positive for CIL and, in turn, the power utilities space.
Production / offtake on target; up 6.4% / 6.3% YoY in 1QFY13…
In 1QFY13, CIL posted a 6.4% YoY rise in production to 102.5mt (up
6.2mt YoY) and 6.3% YoY rise in offtake to 112.9mt (up 6.7mt YoY), in
line with the company’s target. We build in offtake at 460mt (vs. 433mt in
FY12 and CIL’s target of 470mt for FY13) and blended realization at
Rs1,463/ton (implying a 3.2% rise over the normalized FY12 blended
realization of Rs1,418/ton.
…our FY13 forecasts appear fairly achievable; maintain Buy rating
On our FY13F normalized earnings (which includes the incidence of the
potential 26% profit share via the mining tax), the stock trades at 14.2x
P/E, 7.5x EV/EBITDA.