Coal India - Cost Pressure Takes A Toll; Result Update Q2FY15:: Edelweiss report link

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Coal India's (CIL) Q2FY15 EBITDA at INR20.7bn (down ~26% YoY) missed our INR26.7bn estimate owing to higher-than-expected costs, partially cushioned by better blended realisation of INR1,419/t. Sales volume at 111mt (flat YoY) was marginally below estimate, but eAuction volumes at 10.6mt (down 17.5% YoY) surprised positively. Lower-than-expected other income and higher tax rate further dented PAT, which came in at INR21.9bn (down ~28% YoY, ~23% below estimate). Largely led by volume cut, while we have revised down FY15E PAT ~5%, we maintain FY16 PAT estimate. High net cash (INR98/share) and potential dividend yield (~7-8%) are key positives for the stock. However, sluggish volume growth and lack of visibility on price hike imply forward earnings growth of only 3-4% p.a. Maintain 'HOLD' with target price of INR360.

Revenue broadly in line

CIL’s revenue at INR156.8bn (up ~2% YoY, down ~12% QoQ) was in line. Sales volume at 111mt (flat YoY, down 8% QoQ) was marginally lower than estimated 113mt. However, blended realisation at INR1,419/t (flat YoY, down 5% QoQ) was ~3% above estimate. eAuction volumes at 10.6mt (down 17.5% YoY) surprised positively.

High costs spoil the show

EBITDA at INR20.7bn (down ~26% YoY, ~52% QoQ) missed INR26.7bn estimate owing to higher-than-expected costs. CIL reported ~5% higher-than-expected total operating costs led by higher cost of goods sold, employee costs and write offs. Lower other income (~6% below estimate) and higher tax rate (5% above estimate) further affected PAT, which at INR21.9bn (down 28% YoY, ~46% QoQ) was ~23% below estimate.

LINK
https://www.edelweiss.in/research/Coal-India--Cost-Pressure-Takes-A-Toll;-Result-Update-Q2FY15/27510.html