Volume growth to pick up at 6% next year unlike FY12: Management sounded confident to increase production by ~6% in FY13 to around 460 Million Tones. They expect coal off take for the full year in FY13 to be around 470 Million Tones; this is incremental off take of ~35 Mn Tones over FY12.
Management guided that the incremental off take could be from a combination of ~6 Mn Tones from inventory and remaining 29 mn tons would come from incremental production. Hence, effective production growth is expected around 6.6% in FY13.
Management believes 29 Mn Tones of incremental production is achievable as it hinted that during FY12, it lost 17 mn due to heavy rain and by just taking precaution they could have ~10-12 Mn Tones of higher production in FY13.
Further, management aims at production target of 517 Mn Tones in FY14. This indicates a volume growth of 6-7% in FY13 and 7-8% in FY14.
Railways rakes availability scenario looks better: Management shared that the railways rakes availability scenario is better which gives them confidence that they could have incremental off take of about 35 Mn Tones in FY13.
FSA saga update: Management confirmed that only 14 out of total 49 companies have signed new FSA as of now and remaining companies are expected to sign soon. For plants that are commissioned before December 2011 and coming under the new FSA, CIL estimates coal requirement would be around 36 Mn Tones. The company is seeking guidance from ministry regarding signing FSA for all plants that are coming till FY2015. Those plants cumulatively could require additional 108 Mn Tones of Coal.
Realisation improvement seen with GCV mechanism especially on last quarter; further upward revision in two subsidiaries: In Q4FY12, realisation improved by 20% YoY and 14% QoQ, which is obviously on account of implementation of GCV based pricing. Nevertheless, management indicated that realisation of two of its subsidiaries Western Coal Fields and Eastern Coal Fields have declined due to the change in pricing mechanism. Hence, they are looking to revise prices in those two subsidiaries.
Realisation improvement also got support from e-auction front; but need more action on washery front: We learned that in FY12, the company managed to sell 50 Mn Tones of coal through e-auction against 47 Mn Tones over last year. Currently, e-auction coal is selling at blended rate of Rs 2800/ton.
We believe in long run to improve realisation the company should emphasize on improving product mix with higher share of washed coal. However, the activities regarding the same are discouraging.
Large cash pilling up, providing a significant margin of safety; Capex aims at Rs 10,000 crore in FY13: At the end of FY12, CIL is having cash of Rs 58000 cr, that is Rs 92/share and 28% of CMP. Management indicated capex of Rs 10000 cr in FY13 out of which regular investment would be around Rs 4000-5000 crore and remaining Rs 4000-5000 crore would be in improving railways infrastructure. Despite that we do not see cash balance in the books of CIL going down below Rs 57000 crore as the company is able to generate cash to the tune of Rs 9000-10000 crore annually currently.
Jump in receivables seen in FY12: At the end of FY12, there is rise of around Rs 2000 cr in receivables, which management clarified that a chunk of the same is related to incentives earned which would be realised in Q1 FY12 and the company some part are as a result of delay in payment from some SEBs.
View: We believe amidst ambiguity of new FSA with power producers and penalty clause related issues, fundamentally the stock is getting strength as we believe at the end of the day the company is a price giver in long run having such kind of asset base which are in scarcity. To add that pricing power of the company is truncated by government time and again but the commodity (coal) it is bestowed with has got inherent strength of passing on the inflation consistently. Moreover, pricing of coal by CIL is significantly lower than international prices. Also significant cash on books (Rs 92/share that 28% of Current market price) and visibility of adding cash consistently of around Rs 8000-9000 crore gives huge margin of safety. Nevertheless, current concerns would remain as headwinds in short run
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Management guided that the incremental off take could be from a combination of ~6 Mn Tones from inventory and remaining 29 mn tons would come from incremental production. Hence, effective production growth is expected around 6.6% in FY13.
Management believes 29 Mn Tones of incremental production is achievable as it hinted that during FY12, it lost 17 mn due to heavy rain and by just taking precaution they could have ~10-12 Mn Tones of higher production in FY13.
Further, management aims at production target of 517 Mn Tones in FY14. This indicates a volume growth of 6-7% in FY13 and 7-8% in FY14.
Railways rakes availability scenario looks better: Management shared that the railways rakes availability scenario is better which gives them confidence that they could have incremental off take of about 35 Mn Tones in FY13.
FSA saga update: Management confirmed that only 14 out of total 49 companies have signed new FSA as of now and remaining companies are expected to sign soon. For plants that are commissioned before December 2011 and coming under the new FSA, CIL estimates coal requirement would be around 36 Mn Tones. The company is seeking guidance from ministry regarding signing FSA for all plants that are coming till FY2015. Those plants cumulatively could require additional 108 Mn Tones of Coal.
Realisation improvement seen with GCV mechanism especially on last quarter; further upward revision in two subsidiaries: In Q4FY12, realisation improved by 20% YoY and 14% QoQ, which is obviously on account of implementation of GCV based pricing. Nevertheless, management indicated that realisation of two of its subsidiaries Western Coal Fields and Eastern Coal Fields have declined due to the change in pricing mechanism. Hence, they are looking to revise prices in those two subsidiaries.
Realisation improvement also got support from e-auction front; but need more action on washery front: We learned that in FY12, the company managed to sell 50 Mn Tones of coal through e-auction against 47 Mn Tones over last year. Currently, e-auction coal is selling at blended rate of Rs 2800/ton.
We believe in long run to improve realisation the company should emphasize on improving product mix with higher share of washed coal. However, the activities regarding the same are discouraging.
Large cash pilling up, providing a significant margin of safety; Capex aims at Rs 10,000 crore in FY13: At the end of FY12, CIL is having cash of Rs 58000 cr, that is Rs 92/share and 28% of CMP. Management indicated capex of Rs 10000 cr in FY13 out of which regular investment would be around Rs 4000-5000 crore and remaining Rs 4000-5000 crore would be in improving railways infrastructure. Despite that we do not see cash balance in the books of CIL going down below Rs 57000 crore as the company is able to generate cash to the tune of Rs 9000-10000 crore annually currently.
Jump in receivables seen in FY12: At the end of FY12, there is rise of around Rs 2000 cr in receivables, which management clarified that a chunk of the same is related to incentives earned which would be realised in Q1 FY12 and the company some part are as a result of delay in payment from some SEBs.
View: We believe amidst ambiguity of new FSA with power producers and penalty clause related issues, fundamentally the stock is getting strength as we believe at the end of the day the company is a price giver in long run having such kind of asset base which are in scarcity. To add that pricing power of the company is truncated by government time and again but the commodity (coal) it is bestowed with has got inherent strength of passing on the inflation consistently. Moreover, pricing of coal by CIL is significantly lower than international prices. Also significant cash on books (Rs 92/share that 28% of Current market price) and visibility of adding cash consistently of around Rs 8000-9000 crore gives huge margin of safety. Nevertheless, current concerns would remain as headwinds in short run
| Coal India Qtrly Result (in Rs cr) | Q4FY12 | Q4FY11 | YoY (%) | Q3 FY12 | QoQ (%) | FY12 | FY11 | YoY (%) |
| Net Sales | 19419 | 15004.6 | 29% | 15349.3 | 27% | 62415 | 50229 | 24% |
| Cost of material cosnumed | 1732 | 1537.2 | 13% | 1406.4 | 23% | 5504.1 | 5272.8 | 4% |
| Dec/Inc of stock | -1256.6 | -1288.6 | NA | -51.3 | NA | -381.1 | -1215 | NA |
| Net raw material | 475.4 | 248.6 | 91% | 1355.1 | -65% | 5123 | 4057.9 | 26% |
| Employee benefit | 9068.8 | 4806.2 | 89% | 5622.1 | 61% | 25254 | 18932 | 33% |
| Power & Fuel | 528.7 | 427.6 | 24% | 496.3 | 7% | 2012.5 | 1749.5 | 15% |
| Welfare Exp | 474.8 | 426.4 | 11% | 346.6 | 37% | 1451.5 | 1301.8 | 11% |
| Repairs | 277.3 | 298.7 | -7% | 149.7 | 85% | 645.7 | 657.4 | -2% |
| Contract Exp | 1582.2 | 1377.9 | 15% | 1248.4 | 27% | 4901 | 4624.5 | 6% |
| Other Exp | 750.2 | 899.7 | -17% | 489.8 | 53% | 2196.6 | 2231.6 | -2% |
| Finance Cost (excluding Int) | 18.5 | 38.6 | -52% | 5.3 | 246% | 54 | 73.7 | -27% |
| Provision/ Write off | 567.5 | 371.2 | 53% | 333.1 | 70% | 1469.8 | 578.8 | 154% |
| Over Burden removal adjustment | 1908.6 | 1146.6 | 66% | 760.9 | 151% | 3693.9 | 2618.5 | 41% |
| Total Expenditure | 15651.9 | 10041.4 | 56% | 10807.2 | 45% | 46802 | 36825 | 27% |
| EBIDTA | 3767.1 | 4963.2 | -24% | 4542.1 | -17% | 15614 | 13404 | 16% |
| Other Income | 2328 | 1481.1 | 57% | 1855.9 | 25% | 7536.9 | 4872.1 | 55% |
| Interest | 0 | 0 | NA | 7.6 | NA | 0 | 0 | NA |
| EBDT | 6095 | 6444.3 | -5% | 6390.4 | -5% | 23151 | 18276 | 27% |
| Depreciation | 410.3 | 519.5 | -21% | 525.7 | -22% | 1969.2 | 1765.4 | 12% |
| Exceptional item | 45.8 | 16.2 | 183% | 5.2 | 777% | 73.4 | -58 | NA |
| EBT | 5730.5 | 5941 | -4% | 5869.9 | -2% | 21255 | 16453 | 29% |
| Tax | 1722.1 | 1721.8 | 0% | 1832.2 | -6% | 6479 | 5592.4 | 16% |
| Reported Profit After Tax | 4008.4 | 4219.2 | -5% | 4037.8 | -1% | 14776 | 10860 | 36% |
| Extra ordinary Item (net of tax) | -5 | -1.8 | NA | 0 | NA | -12.4 | -6.7 | NA |
| Adj PAT | 4013.4 | 4220.9 | -5% | 4037.8 | -1% | 14788 | 10867 | 36% |
| EPS (Rs.) | 6.41 | 6.67 | -4% | 6.39 | 0% | 23.45 | 17.18 | 36% |
| EPS Adj (Rs) | 6.41 | 6.67 | -4% | 6.39 | 0% | 23.45 | 17.18 | 36% |
| Margins | ||||||||
| EBIDTA(%) | 19.40% | 33.10% | 29.60% | 25.00% | 26.70% | |||
| PAT(%) | 20.60% | 28.10% | 26.30% | 23.70% | 21.60% | |||
| Tax rate | 30.10% | 29.00% | 31.20% | 30.50% | 34.00% | |||
| In Million Tonnes | Q4FY12 | Q4FY11 | YoY (%) | Q3 FY12 | QoQ (%) | FY12 | FY11 | YoY (%) |
| Production | 144.6 | 131.9 | 10% | 114.6 | 26% | 435.8 | 431.3 | 1% |
| Offtake | 122.8 | 114.1 | 8% | 110.3 | 11% | 433.1 | 424.5 | 2% |
| Blended Realisation/ton | 1581 | 1314.7 | 20% | 1392 | 14% | 1441.2 | 1183.3 | 22% |
| EBIDTA/ton | 306.7 | 434.9 | -29% | 411.9 | -26% | 360.5 | 315.8 | 14% |
| Cost/ton | 1082.4 | 761.5 | 42% | 942.9 | 15% | 1073.8 | 853.8 | 26% |
| PAT/ton | 326.75 | 369.83 | -12% | 366.17 | -11% | 341.47 | 255.99 | 33% |
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