 "Coal India: Improved profitability, a positive surprise")
Coal India (CIL) managed to provide some cheer in an otherwise subdued quarter for metal and mining companies. Production increased to 151.9 million tonnes (mt) compared to 143.2 mt a year ago and offtake was up 3.7 per cent in the March quarter; better e-auction volumes helped. These and better cost control led to improved profitability.
Thus, while consolidated sales at Rs 20,774 crore (up four per cent year-on-year) were better than the Bloomberg consensus estimate of Rs 20,572 crore, Ebitda (earnings before interest, tax, depreciation and amortisation) also surprised but by a bigger margin. At Rs 5,965 crore, it grew five per cent year-on-year, pushing up margins to 28 per cent (up 595 basis points sequentially and 37 basis points year-on-year), way higher than the estimate of Rs 5,293 crore.
An 11 per cent increase in taxes (tax rate of 39.4 per cent versus 35.8 per cent in the year-ago period), however, saw net profits decline 4.4 per cent to Rs 4,239 crore.
While the raw coal output has grown marginally by 3.8 per cent over FY07-FY12 due to clearance issues, growth during FY13-15 stood at 4.7 per cent. This is seen improving further.
Analysts at Motilal Oswal Securities see a 300-mt increase in production over FY15-20 of which 100 mt will be aided by de-bottlenecking rail loops, likely to be completed by end-FY18. This, however, indicates that production growth will be back-ended.
From 494 mt in FY15, analysts at Motilal Oswal see production rising to 576 mt in FY17, while analysts at Reliance Securities expect output to touch 548 mt by FY17, growing at a better pace of 5.2 per cent compound annual growth rate. Analysts at Motilal Oswal are factoring in per-tonne FSA realisation to increase from Rs 1,324 in FY16 to Rs 1,450 in FY17. While they expect an earnings CAGR of 12 per cent over FY15-20 and have a target price of Rs 464, other analysts have target price range of Rs 425-431 indicating upside of 11-21 per cent for the stock.
Thus, while consolidated sales at Rs 20,774 crore (up four per cent year-on-year) were better than the Bloomberg consensus estimate of Rs 20,572 crore, Ebitda (earnings before interest, tax, depreciation and amortisation) also surprised but by a bigger margin. At Rs 5,965 crore, it grew five per cent year-on-year, pushing up margins to 28 per cent (up 595 basis points sequentially and 37 basis points year-on-year), way higher than the estimate of Rs 5,293 crore.
An 11 per cent increase in taxes (tax rate of 39.4 per cent versus 35.8 per cent in the year-ago period), however, saw net profits decline 4.4 per cent to Rs 4,239 crore.
While the raw coal output has grown marginally by 3.8 per cent over FY07-FY12 due to clearance issues, growth during FY13-15 stood at 4.7 per cent. This is seen improving further.
Analysts at Motilal Oswal Securities see a 300-mt increase in production over FY15-20 of which 100 mt will be aided by de-bottlenecking rail loops, likely to be completed by end-FY18. This, however, indicates that production growth will be back-ended.
From 494 mt in FY15, analysts at Motilal Oswal see production rising to 576 mt in FY17, while analysts at Reliance Securities expect output to touch 548 mt by FY17, growing at a better pace of 5.2 per cent compound annual growth rate. Analysts at Motilal Oswal are factoring in per-tonne FSA realisation to increase from Rs 1,324 in FY16 to Rs 1,450 in FY17. While they expect an earnings CAGR of 12 per cent over FY15-20 and have a target price of Rs 464, other analysts have target price range of Rs 425-431 indicating upside of 11-21 per cent for the stock.