14 September 2016
1QFY17 Results Update | Sector: Utilities
Coal India
BSE SENSEX
28354
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
S&P CNX
8716
COAL IN
6316.4
2103/31.0
350/272
-3/-4/-12
1321.5
20.5
CMP: INR331
TP: INR350 (+6%)
Downgrade to Neutral
Grade mix impacting FSA realization; Cut est. by
8%
Uncertainties fueling volatility; Downgrade to Neutral
Coal India’s 1QFY17 EBITDA (ex-OBR) of INR38.6b (-24% YoY) was below estimate
of INR43.4b on lower FSA realization. Grade mix deterioration impacted the
realization. OBR provision continues under Ind-AS. PAT of INR30.6b (-19% YoY) was
ahead of estimate of INR29b on lower than estimated OBR provisions. Other
income was down 13% YoY to INR17.6b (in-line) due to lower cash and equivalents.
Financials & Valuations (INR b)
2016 2017E 2018E
Y/E Mar
Sales
756.4 780.5 853.6
EBITDA
159.4 118.1 150.9
NP
142.7 110.7 133.6
EPS (INR)
22.6
17.5
21.2
EPS Gr. (%)
4.0 -22.5
20.7
BV/Sh. (INR)
53.6
55.4
57.5
RoE (%)
42.2
31.7
36.8
RoCE (%)
40.0
33.6
39.2
P/E (x)
14.7
19.0
15.7
P/BV (x)
6.2
6.0
5.8
Div. Yield (%)
8.2
3.9
4.8
Reducing estimates and TP to account for grade mix deterioration
We have cut power sector FSA realization estimates to account for grade mix
deterioration, now factoring ~4%/~1% increase v/s. ~7%/~1% earlier for
FY17E/18E, respectively.
Estimates for cash EBITDA is reduced by ~8% to INR155b/195b for FY17E/18E
respectively. TP is revised to INR350/sh. (@7.5x FY18E EV/EBITDA).
Continuously improving coal prices in the international market strengthen the
case for import substitution, but the volume growth has been elusive so far
perhaps because of falling specific consumption of coal in power plants and
growth in supply of alternative fuels e.g. gas, Nuclear, Renewables. Non-power
sector demand is likely to pick up, in our view.
Uncertainties regarding (1) Impact of deteriorating grade mix on realization (2)
exact quantum of wage hike pending negotiation and (3) volume growth are
fueling volatility to earnings. Although we remain positive on long term
prospect, the near term uncertainties are likely to de-rate the stock. Further,
there is limited upside to the target price. We downgrade the stock to
Neutral.
INR million
4Q
207,595
-0.1
62,100
29.9
6,946
13,195
121
21,393
56
63,287
20,807
32.9
42,479
42,424
0.4
1Q
177,961
-6.1
38,621
21.7
6,672
2,331
890
17,564
0
46,293
15,641
33.8
30,653
30,653
-19.1
FY17
2QE
3QE
182,911 205,169
7.9
8.1
23,291 47,814
12.7
23.3
6,672 6,672
604 10,935
40
40
17,389 18,897
0
0
33,364 49,064
11,010 16,191
33.0
33.0
22,354 32,873
22,354 32,873
-11.3
-10.8
FY16
4QE
214,448
3.3
45,338
21.1
5,850
27,570
-905
19,189
0
32,012
11,652
36.4
20,360
20,360
-52.0
756,443
5.0
187,519
24.8
24,664
28,114
207
80,943
415
215,891
73,148
33.9
142,743
142,329
3.7
FY17E
780,488
3.2
155,063
19.9
25,864
41,440
65
73,039
0
160,733
54,494
33.9
106,239
106,239
-25.4
FY17
Var.
1QE
(%)
183,425
(3)
-3.2
43,440 (11)
23.7
6,946
(4)
10,453
(78)
40
2,124
17,635
(0)
0
43,636
6
14,400
9
33.0
29,236
5
29,236
5
-22.8
Multiple uncertainties fueling volatility to earnings; downgrade to Neutral
Estimate change
TP change
Rating change
Quarterly Performance (Consolidated)
Y/E March
Sales
Change (%)
Cash EBITDA (OBR adj.)
As of % Sales
Depreciation
OBR
Interest
Other Income
EO Income/(Expense)
PBT
Tax
Effective Tax Rate (%)
Reported PAT
Adjusted PAT
Change (%)
1Q
189,558
6.5
50,911
26.9
5,575
7,091
40
20,095
-226
58,072
20,429
35.0
37,643
37,869
-5.7
FY16
2Q
3Q
169,576 189,715
8.2
6.8
25,171 49,337
14.8
26.0
5,864
6,279
410
7,419
15
30
19,636 19,819
248
337
38,766 55,766
13,328 18,584
34.6
33.5
25,438 37,182
25,190 36,845
15.2
12.4
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Sanjay Jain
(SanjayJain@MotilalOswal.com); +91 22 6129 1523
Dhruv Muchhal
(Dhruv.Muchhal@MotilalOswal.com); +91 22 6129 1549

Coal India
Results’ highlights
Realization:
FSA realization declined 6% YoY to INR1,239/t despite the blended
~6% price hike in June due to increase in share of low GCV coal. E-auction
realization at INR1,570/t (down ~INR80 QoQ) was higher than our estimate of
INR1,450/t probably on our longer than estimated spacing of deliveries under
forward e-auctions (which are low priced).
Volumes:
FSA sales were down 1% YoY to 107.7mt. E-auction sales were up 28%
YoY to 20.5mt, representing ~15% of dispatches (up 100bps QoQ/300bps YoY).
Washed coal sales increased 10% YoY to 3.8mt. Overall, offtake was up 3% YoY
to 133mt, while production was up 4% YoY to 125mt.
Cost:
Cash cost (ex-OBR) was down 2% YoY to INR1,048. Employee cost
increased ~6% YoY to INR76.5b. Materials and social overheads were lower.
Exhibit 1: Operational Summary
Key Operational metrics
Volume (m tons)
Production
Sales/Offtake
- Regulated
- E-auction
- Washed Coal
- others
Blended Realisation (Rs/ton)
- Regulated
- E-auction
- Washed Coal
- others
Per ton summary (Rs/ton)
Revenue
cash EBIDTA
PAT
Costs
Q1FY16
121.4
129.4
109.0
16.0
3.4
1.0
Q2FY16
108.2
121.8
103.0
14.7
3.1
0.9
Q3FY16
144.0
137.3
116.4
15.2
3.7
2.0
Q4FY16
165.2
145.2
119.3
20.4
4.2
1.2
Q1FY17
125.7
133.0
107.7
20.5
3.8
1.1
YoY
4%
3%
-1%
28%
10%
10%
QoQ
-24%
-8%
-10%
0%
-10%
-3%
1,318
2,184
2,229
3,324
1,294
1,788
2,328
2,888
1,277
1,866
2,369
2,030
1,350
1,648
2,318
2,774
1,239
1,570
2,555
2,563
-6%
-28%
15%
-23%
-8%
-5%
10%
-8%
1,465
393
293
1,071
1,392
207
207
1,186
1,382
359
268
1,023
1,430
428
292
1,002
1,338
290
230
1,048
-9%
-26%
-21%
-2%
-6%
-32%
-21%
5%
Source: MOSL, Company
Share of off-take from
ECL/BCCL, suppliers of
higher GCV coal, was down
from 15.2% in 1QFY16 to
14.5% in 1QFY17, which
impacted grade mix.
Exhibit 2: Quarterly offtake share by subsidiaries (%)
ECL/BCCL
CCL/NCL/WCL
SECL/MCL
50.1
34.6
15.2
51.9
34.1
13.8
50.6
34.6
14.7
48.9
35.7
15.1
50.5
34.2
15.2
52.9
34.3
12.7
52.6
34.1
13.3
52.0
33.2
14.8
52.4
33.1
14.5
Source: MOSL, Company
14 September 2016
2

Coal India
Exhibit 3: Per GCV pricing for power FSA coal
0.98
0.83 0.79
0.63
0.42 0.40 0.40
0.40 0.43
0.35 0.34 0.32 0.34 0.35 0.36 0.38
INR/GCV (incl. of royalty, sizing and cess)
Cost of unit energy is lower
at lower grades of coal
G2
G3
G4
G5
G6
G7
G8
G9
G10 G11 G12 G13 G14 G15 G16 G17
Source: MOSL, Company
Exhibit 4: E-auction realization – as reported v/s. data from exchanges
3,600
3,000
2,400
1,800
1,200
E-auction real. - CIL - INR/t
E-auction real. - exchanges - INR/t
Source: MOSL, ICMW, Company Data
Exhibit 5: Average e-auction realization
Avg. realization - INR/t
Source: MOSL, ICMW
14 September 2016
3

Coal India
Exhibit 6: Average e-auction realization (ex-special forward e-auction)
Avg. realization - INR/t
Source: MOSL, ICMW
Exhibit 7: Monthly e-auction volumes allocated (July 2016)
Allocated (mt)
8
6
3
4
1
6
3
5
11
9
12
Exhibit 8: Monthly e-auction volumes offered (July 2016)
Offered (mt)
18
14
10
6
28
14
4
6
8
1
8
Source: ICMW
Source: ICMW
14 September 2016
4

Coal India
Financials and Valuations
Income Statement
Y/E March
Net Sales
Change (%)
Operating Expenses
EBITDA
% of Net Sales
adj. EBITDA/ton
Depreciation
Interest
Other Income
Extra Ordinary
PBT
Tax
Rate (%)
PAT before Min. Int.
Minority Interest
Reported PAT
Change (%)
Adjusted PAT
Change (%)
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Minority Interest
Loans
Defferd tax Liabiity
Capital Employed
Gross Fixed Assets
Less: Depreciation
Net Fixed Assets
Capital Work in Progress
Investments
Current Assets
Inventory
Debtors
Other Current Assets
Loans and Advances
Cash
Current Liabilities
Payables
Other current liabilities
Net Curr. Assets
Misc. Expenses
Application of Funds
E: MOSL Estimates
FY12
624,154
24.3
467,476
156,679
25.1
479
19,692
540
76,150
-911
213,508
64,845
30.4
148,664
148,664
35.7
162,386
47.4
FY13
683,027
9.4
502,191
180,836
26.5
490
18,130
452
88,373
-69
250,697
76,227
30.4
174,470
174,470
17.4
177,530
9.3
FY14
688,100
0.7
528,469
159,632
23.2
444
19,964
580
89,694
-14
228,795
77,679
34.0
151,116
151,116
-13.4
159,881
-9.9
FY15
720,146
4.7
567,847
152,300
21.1
431
23,198
73
86,761
-50
215,839
78,573
36.4
137,266
137,266
-9.2
137,316
-14.1
FY16
756,443
5.0
597,038
159,404
21.1
393
24,664
207
80,943
-414
215,891
73,148
33.9
142,743
142,743
4.0
142,743
4.0
FY17E
780,488
3.2
662,415
118,073
15.1
325
25,864
65
73,039
0
165,183
54,494
33.0
110,689
110,689
-22.5
110,689
-22.5
(INR Million)
FY18E
853,590
9.4
702,647
150,943
17.7
361
27,064
61
72,692
0
196,510
62,864
32.0
133,646
133,646
20.7
133,646
20.7
(INR Million)
FY18E
63,164
299,862
363,025
658
4,019
-19,591
348,112
628,080
364,523
263,557
111,594
28,134
757,971
70,158
100,560
61,808
105,150
420,295
813,145
10,758
802,387
-55,174
0
348,112
FY12
63,164
341,366
404,530
536
13,054
-11,941
406,179
380,964
246,561
134,403
29,034
19,814
874,731
60,713
56,630
30,347
145,013
582,028
651,801
8,290
643,511
222,930
0
406,181
-568,974
FY13
63,164
421,556
484,720
636
10,778
-22,550
473,584
390,107
255,449
134,658
34,960
23,950
999,590
56,178
104,802
42,489
173,760
622,360
719,573
8,372
711,201
280,017
0
473,584
-431,184
FY14
63,164
360,881
424,045
636
1,715
-19,717
406,678
414,795
266,951
147,844
43,158
37,749
793,955
55,681
82,410
54,375
77,594
523,895
616,028
8,051
607,978
177,927
0
406,678
-522,181
FY15
63,164
340,367
403,531
658
4,019
-19,591
388,617
448,080
286,929
161,150
51,594
28,134
844,940
61,838
85,219
61,808
105,150
530,925
697,201
9,208
687,994
147,739
0
388,617
FY16
63,164
275,428
338,592
658
4,019
-19,591
323,678
508,080
311,594
196,486
71,594
28,134
753,105
62,173
89,115
61,808
105,150
434,859
725,641
9,533
716,108
27,464
0
323,678
FY17E
63,164
286,497
349,661
658
4,019
-19,591
334,747
568,080
337,458
230,622
91,594
28,134
751,781
64,150
91,948
61,808
105,150
428,726
767,384
9,836
757,548
-15,603
0
334,747
14 September 2016
5

Coal India
Financials and Valuations
Ratios
Y/E March
Basic
Adjusted EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation (x)
P/E
P/BV
EV/Adj. EBITDA
Dividend Yield (%)
EV /ton of Reserves
Profitability Ratios (%)
Debtor (Days)
Inventory (Days)
Payables (Days)
Asset turnover(x)
Profitability Ratios (%)
RoE
RoCE
RoIC
Leverage Ratio
Current Ratio
Net Debt/Equity (x)
Cash Flow Statement
Y/E March
Adj EBITDA*
Non cash exp. (income)
(Inc)/Dec in WC
Taxes paid
CF from Operations
Capex
Free Cash Flow
(Pur)/Sale of Investments
Interest/dividend
CF from Investments
Equity raised/(repaid)
Debt raised/(repaid)
Interest paid
Dividend (incl. tax)
Other financing
CF from Fin. Activity
Inc/Dec of Cash
Add: Beginning Balance
Closing Balance
FY12
25.7
34.7
64.0
10.0
46.2
FY13
28.1
36.0
76.7
14.0
57.3
FY14
25.3
33.7
67.1
29.0
132.2
FY15
21.7
31.5
63.9
20.7
112.9
FY16
22.6
31.0
53.6
27.4
145.5
FY17E
17.5
28.2
55.4
13.1
90.0
FY18E
21.2
32.5
57.5
15.9
90.0
13.0
5.2
7.4
3.0
70.6
11.8
4.3
6.6
4.2
68.6
13.2
5.0
7.5
8.7
72.7
15.3
5.2
7.5
6.2
72.5
14.7
6.2
8.0
8.2
76.9
19.0
6.0
9.2
3.9
77.2
15.7
5.8
7.6
4.8
77.6
33.1
35.5
4.8
1.5
56.0
30.0
4.5
1.4
43.7
29.5
4.3
1.7
43.2
31.3
4.7
1.9
43.0
30.0
4.6
2.3
43.0
30.0
4.6
2.3
43.0
30.0
4.6
2.5
36.7
40.0
-51.6
36.0
39.7
-52.4
35.6
34.4
-45.5
34.0
34.5
-39.1
42.2
40.0
-41.2
31.7
33.6
-29.1
36.8
39.2
-39.6
-1.4
-1.3
-1.2
-1.3
-1.3
-1.2
-1.1
(INR Million)
FY18E
220,833
12,271
-13,699
-62,864
156,542
-80,000
76,542
0
35,370
-44,630
0
0
-61
-120,282
-120,343
-8,431
428,726
420,295
FY12
207,378
22,897
35,647
-67,044
198,879
-34,094
164,784
-9,177
42,177
-1,094
0
-2,474
-540
-74,291
3,483
-73,821
123,963
458,064
582,028
FY13
227,544
18,457
-68,387
-86,520
91,094
-24,540
66,554
-4,136
56,433
27,758
0
-2,287
-452
-79,070
3,289
-78,520
40,332
582,028
622,360
FY14
209,473
21,596
2,442
-88,264
145,247
-41,164
104,083
-13,799
64,754
9,791
0
-12,634
-580
-242,430
2,141
-253,503
-98,465
622,360
523,895
FY15
210,836
22,213
6,487
-95,721
143,815
-49,014
94,801
9,615
52,871
13,472
0
1,935
-73
-155,963
3,844
-150,257
7,030
523,895
530,925
FY16
209,387
9,964
-3,906
-73,148
142,297
-80,000
62,297
0
49,111
-30,889
0
0
-207
-207,682
-207,888
-96,481
530,925
434,444
FY17E
182,555
11,947
-4,506
-54,494
135,502
-80,000
55,502
0
38,050
-41,950
0
0
-65
-99,620
-99,685
-6,133
434,859
428,726
14 September 2016
6

Coal India
NOTES
14 September 2016
7

Disclosures
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In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Varun Kumar
Varun.kumar@motilaloswal.com
Contact : (+65) 68189232
Office Address:21 (Suite 31),16 Collyer Quay,Singapore 04931
Kadambari Balachandran
kadambari.balachandran@motilaloswal.com
(+65) 68189233 / 65249115
Motilal Oswal Securities Ltd
14 September 2016
Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025
Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com
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