COAL_INDIA：CONSISTENTLY_DELIVERING-2012-08-16.ppt

37.1,4.2,8.4,31.4,3.4,7.0,energy / india 13 august 2012,coal india coal in,target price: rs400.00 rs400.00 up/downside: +15.1% share price (13 aug): rs347.65,consistently delivering coal indias 1q fy13 results were in line with our forecasts and 6% above consensus production performance in 2q fy13 will remain a key factor to monitor reiterate buy, post the consistent performance in 1qfy13 how do we justify our view?,costs. the pat came to rs44.7bn, in line with our forecast, led largely by higher other income.,consensus, due mainly to our lower assumption for employee costs. forecast revisions (%),saurabh mehta (91) 22 6622 1009 ,key factors to monitor in 9m fy13: 1) the final framework of the fuel supply agreement (fsa) and coal pooling, 2) cils production performance in 2q fy13 we believe,year to 31 mar revenue change net-profit change eps change source: daiwa forecasts,12e 0.0 0.0 0.0,13e 0.0 0.0 0.0,14e 0.0 0.0 0.0,whats new coal indias (cil) 1q fy13 results, announced on 13 august, showed a pat of rs44.7bn, in line with our forecast and 6% above that of the bloomberg consensus. whats the impact results highlights. cils revenue rose by 13.8% yoy on the back of an increased asp (to rs1,461, up 7.3% yoy) and a higher off-take (up 6.3% yoy). the asp was down by 2.6% qoq (compared to the adjusted 4q fy12 asp for incentives) due to a 10% qoq fall in the e-auction asp to rs2,561, which we believe is due to fallen imported coal prices. employee costs were rs61.3bn, up 26% yoy, though were below our forecast of rs64.5bn. however, the lower employee costs compared to our forecast were offset by a higher overburden removal (up 24.6% yoy), social overheads (up 37.4% yoy), and other expenses (up 24.6% yoy). ebitda per tonne was rs426, down 6% yoy, due largely to higher wage,that to achieve its full-year targets, cils 2q fy13 performance will be key to monitor, as its fy12 performance was affected adversely by heavy monsoons, and 3) the actual revenue impact of the price increase at subsidiary wcl (21 june) and subsidiary ecl (pending) to adjust for the negative impact of the change in cils coal-grading system from uhv to gcv. what we recommend in the current weak macroeconomic environment, cil enjoys high earnings visibility, with 80% of its sales at notified prices. it has a strong balance sheet, with net cash (rs569bn at end-fy12). we reiterate our buy (1) rating and dcf-based six-month target price of rs400. inadequate evacuation infrastructure and delays in approvals from the ministry of environment and forests would be the key risks to our call. how we differ our fy13 eps forecast is higher than that of the bloomberg,share price performance (rs) (%) 430 110 390 100 350 90 310 80 270 70 aug-11 nov-11 feb-12 may-12 aug-12 coal india (lhs) relative to sensex (rhs) 12-month range 297.55-397.90 market cap (us$bn) 39.72 average daily turnover (us$m) 11.29 shares outstanding (m) 6,316 major shareholder president of india (90.0%) financial summary (rs) year to 31 mar 12e 13e 14e revenue (m) 624,155 670,240 718,402 operating profit (m) 136,986 160,369 173,320 net profit (m) 147,315 169,759 184,201 core eps 23.323 26.876 29.162 eps change (%) 35.6 15.2 8.5 daiwa vs cons. eps (%) - 1.0 (1.8) per (x) 14.9 12.9 11.9 dividend yield (%) 1.9 1.0 1.1 dps 6.500 3.494 3.791 pbr (x) 5.6 ev/ebitda (x) 10.6 roe (%) 40.4 source: bloomberg, daiwa forecasts,important disclosures, including any required research certifications, are provided on the last two pages of this report.,energy / india coal in 13 august 2012 financial summary key assumptions,year to 31 mar coal production (million tonnes) coal dispatch (million tonnes) coal avg. blended price per tonnes (inr),2007 360.9 351.1 843.0,2008 379.5 375.3 869.4,2009 403.7 401.4 966.3,2010 431.3 415.4 1,074.1,2011 431.3 423.3 1,186.6,2012e 435.8 432.6 1,443.0,2013e 453.3 449.9 1,489.9,2014e 471.4 467.8 1,535.6,profit and loss (rs m),year to 31 mar coal others others total revenue other income cogs sg&a other op. expenses operating profit net-interest inc./(exp.) assoc/forex/extraord./others pre-tax profit tax min. int./pref. div./others net profit (reported) net profit (adjusted) eps (reported) (rs) eps (adjusted) (rs) eps (adjusted fully-diluted) (rs) dps (rs) ebit ebitda,2007 296,022 0 0 296,022 21,880 (204,298) (12,640) (46,625) 54,339 14,703 16,982 86,025 (28,937) 0 57,087 57,087 9.038 9.038 9.038 1.529 54,339 67,455,2008 326,339 0 0 326,339 22,187 (239,012) (14,873) (49,989) 44,651 19,456 23,071 87,178 (34,745) 0 52,433 52,433 8.301 8.301 8.301 1.298 44,651 59,951,2009 387,888 0 0 387,888 21,556 (323,177) (19,285) (59,516) 7,466 26,882 23,059 57,407 (36,632) 0 20,775 20,775 3.289 3.289 3.289 1.830 7,466 24,095,2010 446,153 0 0 446,153 27,362 (298,739) (19,336) (66,297) 89,142 25,575 24,928 139,646 (43,425) 0 96,221 96,221 15.234 15.234 15.234 2.269 89,142 102,281,2011 502,336 0 0 502,336 36,359 (327,162) (22,077) (71,565) 117,890 29,041 17,701 164,632 (55,959) 0 108,674 108,674 17.205 17.205 17.205 2.479 117,890 134,619,2012e 624,155 0 0 624,155 0 (379,358) (21,966) (85,844) 136,986 43,029 32,090 212,106 (64,790) 0 147,315 147,315 23.323 23.323 23.323 6.500 136,986 156,678,2013e 670,240 0 0 670,240 0 (402,718) (24,243) (82,911) 160,369 51,644 34,015 246,028 (76,269) 0 169,759 169,759 26.876 26.876 26.876 3.494 160,369 181,137,2014e 718,402 0 0 718,402 0 (428,206) (27,103) (89,773) 173,320 57,027 36,611 266,957 (82,757) 0 184,201 184,201 29.162 29.162 29.162 3.791 173,320 196,127,cash flow (rs m),year to 31 mar profit before tax depreciation and amortisation tax paid change in working capital other operational cf items cash flow from operations capex net (acquisitions)/disposals other investing cf items cash flow from investing change in debt net share issues/(repurchases) dividends paid other financing cf items cash flow from financing forex effect/others change in cash free cash flow,2007 86,025 12,285 (23,325) 239 (32,018) 43,205 (15,342) 0 0 (15,342) (1,751) 0 (18,875) 16,609 (4,018) 0 23,845 27,863,2008 87,178 13,800 (29,297) 27,621 (27,873) 71,428 (18,350) 0 0 (18,350) (2,600) 0 (19,953) 23,490 937 0 54,016 53,078,2009 57,407 10,630 (27,907) 56,054 (5,853) 90,332 (18,746) 0 0 (18,746) 2,646 0 (17,054) 29,616 15,208 0 86,794 71,586,2010 139,646 6,750 (39,990) (1,310) (24,719) 80,377 (19,804) 0 0 (19,804) (616) 0 (22,100) 28,031 5,315 0 65,888 60,573,2011 164,632 16,729 (56,228) (38,199) (25,983) 60,951 (24,870) 0 0 (24,870) (4,096) 0 (25,832) 30,480 552 0 36,633 36,081,2012e 212,106 19,692 (64,790) 61,719 (42,490) 186,237 (46,500) 0 0 (46,500) (1,500) 0 (85,271) 43,029 (43,742) 0 95,995 139,737,2013e 246,028 20,768 (76,269) 24,005 (50,648) 163,884 (40,000) 0 0 (40,000) (1,500) 0 (45,835) 51,644 4,309 0 128,193 123,884,2014e 266,957 22,808 (82,757) 25,086 (56,143) 175,952 (35,000) 0 0 (35,000) (1,500) 0 (49,734) 57,027 5,793 0 146,745 140,952,source: company, daiwa forecasts -2-,energy / india coal in 13 august 2012 financial summary continued balance sheet (rs m),as at 31 mar cash & short-term investment inventory accounts receivable other current assets total current assets fixed assets goodwill & intangibles other non-current assets total assets short-term debt accounts payable other current liabilities total current liabilities long-term debt other non-current liabilities total liabilities share capital reserves/r.e./others shareholders equity minority interests total equity & liabilities ev net debt/(cash) bvps (rs),2007 159,293 31,250 16,822 78,184 285,549 116,543 0 26,861 428,954 18,112 0 236,171 254,283 3,327 9,212 266,822 63,164 98,968 162,131 0 428,954 2,058,030 (137,854) 25.668,2008 209,615 34,074 16,572 102,663 362,923 120,071 0 25,057 508,050 16,592 0 305,945 322,537 2,247 11,259 336,043 63,164 108,843 172,007 0 508,050 2,005,108 (190,776) 27.232,2009 296,950 36,666 18,475 117,271 469,362 129,283 0 24,600 623,244 19,680 0 399,422 419,102 1,805 12,238 433,146 63,164 126,916 190,080 19 623,244 1,920,438 (275,465) 30.093,2010 390,782 44,018 21,686 86,778 543,265 142,461 0 22,425 708,151 16,199 0 415,557 431,757 3,432 14,774 449,963 63,164 194,789 257,952 236 708,151 1,824,969 (371,151) 40.839,2011 458,623 55,856 30,256 99,259 643,994 150,610 0 19,369 813,973 15,210 0 448,725 463,935 326 16,214 480,475 63,164 270,008 333,172 326 813,973 1,753,123 (443,087) 52.747,2012e 554,109 62,415 31,208 138,847 786,579 177,417 0 19,369 983,366 13,710 0 557,543 571,253 326 16,214 587,793 63,164 332,084 395,247 326 983,366 1,656,137 (540,073) 62.575,2013e 681,306 67,024 33,512 149,097 930,938 196,650 0 19,369 1,146,957 12,210 0 598,710 610,920 326 16,214 627,459 63,164 456,008 519,172 326 1,146,957 1,527,440 (668,770) 82.195,2014e 827,166 71,840 35,920 159,808 1,094,735 208,842 0 19,369 1,322,946 10,710 0 641,732 652,442 326 16,214 668,981 63,164 590,475 653,638 326 1,322,946 1,380,079 (816,131) 103,key ratios (%),year to 31 mar sales (yoy) ebitda (yoy) operating profit (yoy) net profit (yoy) eps (yoy) gross-profit margin ebitda margin operating-profit margin roae roaa roce roic net debt to equity effective tax rate accounts receivable (days) payables (days) net interest cover (x) net dividend payout,2007 3.1 (8.4) (10.1) (3.1) (3.1) 31.0 22.8 18.4 37.5 13.9 31.1 129.4 net cash 33.6 22.0 0.0 n.a. 16.9,2008 10.2 (11.1) (17.8) (8.2) (8.2) 26.8 18.4 13.7 31.4 11.2 23.9 975.0 net cash 39.9 18.7 0.0 n.a. 15.6,2009 18.9 (59.8) (83.3) (60.4) (60.4) 16.7 6.2 1.9 11.5 3.7 3.7 n.a. net cash 63.8 16.5 0.0 n.a. 55.6,2010 15.0 324.5 n.m. 363.2 363.2 33.0 22.9 20.0 43.0 14.5 36.4 n.a. net cash 31.1 16.4 0.0 n.a. 14.9,2011 12.6 31.6 32.2 12.9 12.9 34.9 26.8 23.5 36.8 14.3 37.6 n.a. net cash 34.0 18.9 0.0 n.a. 14.4,2012e 24.3 16.4 16.2 35.6 35.6 39.2 25.1 21.9 40.4 16.4 36.1 n.a. net cash 30.5 18.0 0.0 n.a. 27.9,2013e 7.4 15.6 17.1 15.2 15.2 39.9 27.0 23.9 37.1 15.9 34.1 n.a. net cash 31.0 17.6 0.0 n.a. 13.0,2014e 7.2 8.3 8.1 8.5 8.5 40.4 27.3 24.1 31.4 14.9 29.0 n.a. net cash 31.0 17.6 0.0 n.a. 13.0,source: company, daiwa forecasts company profile coal india is the largest coal-mining company in the world in terms of raw coal production (433m tonnes for fy11), total coal reserves (18.86bn tonnes), and resources base (64.22bn tonnes). -3-,energy / india coal in 13 august 2012 cil: 1q fy13 results summary,(rs bn) production dispatch inventory rakes availability asps net sales employee cost contractual expenses overburden removal adjustment others total expenses ebitda ebitda margin (%) ebitda per tonne depreciation ebit interest other income pbt taxes pat,1q fy13 102.5 112.9 62 177 1,461 165.0 61.3 12.3 7.3 35.9 116.9 48.1 29.2 426 5.4 42.8 0.1 20.7 63.3 18.6 44.7,1q fy12 96.3 106.3 60 164 1,362 145.0 48.7 11.1 5.9 31.1 96.8 48.2 33.2 454 4.3 43.9 0.1 15.6 59.6 18.1 41.4,4q fy12 145 123 73 195 1,581 194.2 90.7 15.8 19.1 30.7 156.3 37.9 19.5 308 4.1 33.8 0.2 23.3 57.4 17.2 40.1,yoy (%) 6.4 6.3 3.8 7.9 7.3 13.8 25.8 11.6 24.6 15.3 (0.1) (6.0) 32.9 7.9,qoq (%) (29.1) (8.1) (14.4) (9.2) (7.6) (15.0) (32.4) (22.0) (61.6) 16.8 27.2 38.3 (11.0) 11.4,source: company,blended asp down 2.6% qoq for 1q fy13 due to lower e- auction asps rs/tonne 1,500 1500 1461,fsa asps up 1.3% qoq for 1q fy13 with improved sales mix rs/tonne 1,400 1,300,1,400,1362,1410,1396,1,200 1,100,1188,1225,1163,1251,1267,1,300,1,000 900,1,200,1q fy12,2q fy12,3q fy12,4q fy12,1q fy13,800,1q fy12,2q fy12,3q fy12,4q fy12,1q fy13,source: company e-auction asps down by 10% qoq for 1q fy13, in line with fall in imported coal prices rs/tonne 3,000,source: company cils washed asp remained flattish qoq for 1q fy13 rs/tonne 2,500,2,800 2,600,2852,2851,2,300 2,100,2179,2262,2318,2315,2,400 2,200,2246,2435,2561,1,900 1,700,2089,2,000,1q fy12,2q fy12,3q fy12,4q fy12,1q fy13,1,500,1q fy12,2q fy12,3q fy12,4q fy12,1q fy13,source: company,-4-,source: company,0,0,energy / india coal in 13 august 2012,e-auction volumes as % of total dispatches were flat qoq for 1q fy13,fsa price vs. e-auction price: premiums have fallen,m tonnes,%,m tonnes,%,120 110,15 12,1,400 1,300,145,128,150 130,100 90,106,94,110,123,113,9 6 3,1,200 1,100 1,000 900,1,188,89,1,225,99,1,163,1,251,1,267,102,110 90 70,80,1q fy12,2q fy12,3q fy12,4q fy12,1q fy13,800,1q fy12,2q fy12,3q fy12,4q fy12,1q fy13,50,total off-take,e-auction volumes (% of total off-take),fsa (rs tonne, lhs),premium of e-auction over fsa (rhs),source: company employee costs up 26% yoy with impact of wage hike, but 5% lower than expected,source: company total cost per tonne up 13.5% yoy for 1q fy13 on higher employee costs, obr cost (up 25% yoy), social overheads (up 38% yoy) and other expenses (up 27% yoy),rs bn 100,% 100,rs/tn 1,400,80,90.7,80,1,200,60,60 40,48.7,56.9,56.2,61.3,40 20,1,000 800,1,005,1,329,943,1,081,1,141,20,-,1q fy12,2q fy12,3q fy12,4q fy12,1q fy13,600,employee cost (lhs),yoy growth (rhs),1q fy12,2q fy12,3q fy12,4q fy12,1q fy13,source: company,source: company,note: obr overburden removal,ebitda per tonne down 6% for 1q fy13 due to higher employee costs rs/tn 500 400 300,ebitda margin came to 29.2% for 1q fy13 % 35 30 25,200 100,454,264,412,308,426,20 15,33.2,18.8,29.6,19.5,29.2,1q fy12,2q fy12,3q fy12,4q fy12,1q fy13,10,1q fy12,2q fy12,3q fy12,4q fy12,1q fy13,source: company,-5-,source: company,energy / india coal in 13 august 2012,cil: quarterly production m tonnes 150 130 110,cil: quarterly dispatches m tonnes 130 120 110,90 70 50,96 1q fy12,80 2q fy12,115 3q fy12,145 4q fy12,102 1q fy13,100 90 80,106 1q fy12,94 2q fy12,110 3q fy12,123 4q fy12,113 1q fy13,source: company cil: quarterly railway rake availability m tonnes,source: company cil: mode of dispatches %,200 190 180 170,100 80 60,3 31 18,3 31 18,3 30 18,3 28 19,2 29 18,160 150 140 130,164 1q fy12,148 2q fy12,176 3q fy12,195 4q fy12,177 1q fy13,40 20 0,48 1q fy12,48 2q fy12 rail,49 3q fy12 mgr road,50 4q fy12 others,50 1q fy13,source: company cil: production targets and sourcing,source: company cil: production targets across subsidiaries,m tonnes 650 500,464 5,488 10,531 42,575 70,615 97,m tonnes 700 600 500 400,464 112,488 120,531 135,575 150,615 167,350,230,255,286,307,326,300,200 50,227 fy13e,223 fy14e,ex isting,202 fy15e ongoing,197 fy16e future,192 fy17e,200 100 0,55 fy13e ecl,bccl,63 fy14e ccl,ncl,75 fy15e wcl,85 fy16e secl mcl,92 fy17e nec,source: company,-6-,source: company,energy / india coal in 13 august 2012 cil: key assumptions,component production yoy change dispatch yoy change railway dispatches railway dispatches rail wagons required raw coal e-auction e-auction washed coal blended asp yoy change raw coal asp yoy change e-auction coal asp yoy change,unit m tonnes % m tonnes % m tonnes as a % of total dispatches unit m tonnes m tonnes as a % of total dispatches m tonnes rs % rs % rs %,fy12 436 1.0 433 2.2 212 49.1 168 362 51 11.8 17 1,443 21.6 1,235 14.5 2,599 40.8,fy13e 453 4.0 450 4.0 225 50.0 181 376 50 11.1 17 1,490 3.3 1,284 4.0 2,800 7.7,fy14e 471 4.0 468 4.0 243 51.9 192 395 50 10.7 17 1,536 3.1 1,336 4.0 2,857 2.0,source: company, daiwa forecasts -7-,daiwas asia pacific research directory,hong kong,south korea,nagahisa miyabe,(852) 2848 4971,,chang h lee,(82) 2 787 9177,,regional research head,head of korea research; strategy; banking/finance,christopher lobello,(852) 2848 4916,,sung yop chung,(82) 2 787 9157,,regional research co-head,pan-asia co-head/regional head of automobiles and components; automobiles;,john hetherington (852) 2773 8787 head of product management tathagata guha roy (852) 2773 8731, ,shipbuilding; steel anderson cha banking/finance,(82) 2 787 9185,,head of thematic research; product management mingchun sun (852) 2773 8751 ,mike oh (82) 2 787 9179 capital goods (construction and machinery),,head of china research; chief economist (regional),sang hee park,(82) 2 787 9165,,dave dai,(852) 2848 4068,,consumer/retail,deputy head of hong kong and china research; pan-asia/regional head of clean,jae h lee,(82) 2 787 9173,,energy and utilities; utilities; power equipment; renewables (hong kong, china),it/electronics (tech hardware and memory chips),kevin lai,(852) 2848 4926,,jihye choi,(82) 2 787 9121,,deputy head of regional economics; macro economics (regional),materials (chemicals); oil and gas,chi sun,(852) 2848 4427,,thomas y kwon,(82) 2 787 9181,,macro economics (china),pan-asia head of internet software (korea) internet/on-line game,jonas kan,(852) 2848 4439,,shannen park,(82) 2 787 9184,,head of hong kong research; head of hong kong and chin