1. Healthcare

Offer for Sale Note
January 29, 2015
Rating matrix
Coal India (COALIN)
Rating
:
Floor Price | 358
Subscribe
Maharatna available at fair valuation…
Issue Details
Auction Date
Issue Size
January 30, 2015
| 22613 crore*
No of Shares on offer
63.16 crore *
Fresh Issue
Nil
*Based on floor price, considering 10% equity stake sale
Objects of the Issue
Objects of the Issue
It is an offer for sale wherein the entire proceeds will go to the
promoters of the company ie GoI by way of disinvestment and no
proceeds shall go to the company
Shareholding Pattern
Pre -Issue
Post - Issue#
No Of Shares (in Crore)
631.6
631.6
Promoters(%)
89.65
79.65
10.35
20.35
Non-Promoter (%)
#Considering 10% equity stake sale
Stock Data
Particular
Market Capitalization
Total Debt (FY14)
Amount
| 236863.7 Crore
| 171.5 Crore
Cash and Investments (FY14)
EV
52 week H/L
Equity capital
| 52389.5 Crore
| 184645.6 Crore
424 / 238
| 6316.4 Crore
Face value
| 10
Research Analyst
Dewang Sanghavi
[email protected]
Isha Bansal
[email protected]
ICICI Securities Ltd | Retail Equity Research
The Government of India (GoI) has launched an offer for sale (OFS) of
31.58 crore equity shares (5% stake) of Coal India (CIL) with an option to
sell an additional 31.58 crore equity shares (5% stake) collectively
aggregating to approximately 10% of the total paid-up equity share
capital of the company. Retail investors will be allocated shares at a
discount of 5%.
Government’s thrust on augmenting output augurs well for company
One of the key thrust areas of the new government has been on
augmenting domestic coal production to ease the crippling fuel scarcity in
the power sector. The Coal Ministry has highlighted CIL’s production
target at 1 billion tonnes by FY20 from the current level of 462 MT in
FY14. Though the government’s target is significantly optimistic and
aggressive, it reinforces its strong focus on enhancing CIL’s production.
We believe it is too early to model such aggressive assumptions.
However, easing of norms and simultaneous removal of offtake
bottlenecks could help realise the full potential performance of CIL.
Furthermore, most of the production growth is likely to be back-ended as
projects get implemented.
Healthy volume growth in Q3FY15 reiterates positive stance
Over the last couple of years, coal production at CIL has been sluggish
with FY13 and FY14 coal production growth at 3.7% and 2.3%,
respectively. However, with the increased thrust of the new government
on augmenting coal production, CIL was able to report healthy growth in
production volumes in the current fiscal year. In Q3FY15, CIL reported
double digit growth in its production volume, reiterating our positive
stance on the company. During Q3FY15, CIL’s production volume stood
at 131.7 MT, up 10.9% YoY. Sales volume in Q3FY15 was healthy at 124.6
MT, up 6.3% YoY. During April-December 2014, CIL’s production and
offtake stood at 342.4 million tonnes (MT) and 354.6 MT, respectively, up
7.3% and 3.8%, respectively, YoY.
Margins likely to increase, going forward
We believe Coal India will be a key beneficiary of declining diesel cost.
Hence, we expect EBITDA margins to improve, going forward, from
~19.0% reported in H1FY15 to ~22.5% in FY15E and ~22.1% in FY16E.
Furthermore, CIL is also likely to enjoy economies of scale on account of
increase in volumes. Going forward, on the back of strong demand from
key user industries, we also expect domestic prices to remain firm with an
upward bias.
Long term growth story intact, recommend subscribe
CIL has a strong balance sheet with robust cash flows and a healthy
liquidity position. At floor prices of | 358, the stock is quoting at FY16E
adjusted EV/EBITDA of 7.0x. We remain positive on the long term
prospects of the company. With a stable government in place at the
Centre, we believe the stock will be a key beneficiary of reforms in the
sector. Going forward, CIL is well poised to deliver a healthy performance
and is a priced asset worth holding in one’s portfolio. We recommend
SUBSCRIBE on the stock in the OFS.
Operational Highlights
Exhibit 1: Coal sales volume & realisations trend
1463
1500
1452
1400
1183
1200
400
1000
300
200
1600
423
464
433
525
498
472
800
600
| per tonne
million tonne (MT)
500
1472
1441
600
400
100
200
0
0
FY11
FY12
FY13
Sales
FY14
FY15E
FY16E
Blended Realizations
Source: Company, ICICIdirect.com Research
26.5
22.1
23.2
22.5
30
25
20
15,963
16,571
17,382
10
FY12
FY13
FY14
FY15E
FY16E
EBITDA
EBITDA Margin
5
(5)
%
15
| per tonne
25.1
18,084
18,500
18,000
17,500
17,000
16,500
16,000
15,500
15,000
14,500
14,000
Exhibit 3: … corresponding EBITDA/tonne
15,668
| crore
Exhibit 2: EBITDA margins trend
1600
1400
1200
1000
800
600
400
200
0
1443
1472
1463
1452
1500
317
362
389
339
333
335
FY11
FY12
FY13
FY14
FY15E
FY16E
1187
Realization
EBITDA/tonne
Source: Company, ICICIdirect.com Research
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 2
Financial Summary
Profit & Loss Account
Cash flow statement
[
(Year-end March)
Net Sales
Other Operating Income
Total Operating Income
Growth (%)
Raw Materials Consumed
Employee Expenses
Contractual Expenses
Overburden removal adjustment
Power & Fuel
Others
Total Operating Expenditure
EBITDA
Growth (%)
Depreciation
Interest
Other Income
Exceptional Item
PBT
Total Tax
PAT
Growth (%)
Adj EPS (|)
FY13
68302.7
68302.7
9.4
6,556.0
27,320.8
5,802.0
3,201.7
2,333.5
5,005.1
50219.1
18083.6
15.4
1813.0
45.2
8746.7
-6.9
24979.0
7622.7
17356.4
17.4
27.5
FY14
68810.0
68810.0
0.7
7,114.7
27,769.4
6,827.5
3,286.6
2,282.2
5,566.4
52846.9
15963.2
(11.7)
1996.4
58.0
8969.3
-1.4
22879.5
7767.9
15111.6
-12.9
23.9
FY15E
73704.1
73704.1
7.1
9,308.0
29,852.1
7,450.0
2,755.3
2,344.7
5,423.4
57133.5
16570.6
3.8
2115.3
4.4
8080.5
(20.6)
22552.0
7592.9
14959.1
-1.0
23.7
(Year-end March)
Profit after Tax
Add: Depreciation
Add: Interest
(Inc)/dec in Current Assets
Inc/(dec) in CL and Prov.
CF from operating activities
(Inc)/dec in Investments
(Inc)/dec in Fixed Assets
Others
CF from investing activities
Issue/(Buy back) of Equity
Inc/(dec) in loan funds
Interest Paid
Dividend paid & dividend tax
Others
CF from financing activities
Net Cash flow
Opening Cash
Closing Cash
FY16E
78750.6
78750.6
6.8
8,660.5
32,091.0
8,398.1
3,096.8
2,624.4
6,498.0
61368.9
17381.8
4.9
2325.5
4.8
11188.6
26240.1
8659.2
17580.8
17.5
27.8
FY13
17356.4
1813.0
45.2
-8492.4
5878.6
16600.7
-413.6
-2430.4
-722.1
-3566.0
0.0
381.7
-45.2
-10166.1
828.7
-9000.9
4033.8
58202.8
62236.6
FY14
15111.6
1996.4
58.0
10710.9
-9517.2
18359.6
-1237.3
-4278.0
283.3
-5232.1
0.0
-1737.6
-58.0
-21156.6
-22.4
-22974.7
-9847.1
62236.6
52389.5
FY15E
14959.1
2115.3
4.4
-21864.8
25917.1
21131.2
-100.0
-3500.0
0.0
-3600.0
0.0
0.0
-4.4
-8868.2
10.4
-8862.1
8669.0
52389.5
61058.5
FY16E
17580.8
2325.5
4.8
16018.0
-3658.6
32270.5
-100.0
-4000.0
0.0
-4100.0
0.0
0.0
-4.8
-8868.2
0.0
-8873.0
19297.5
61058.5
80356.0
[
Source: Company, ICICIdirect.com Research
Source: Company, ICICIdirect.com Research
[
Balance sheet
(Year-end March)
Liabilities
Equity Share Capital
Reserve and Surplus
Total Shareholders funds
Total Debt
Minority Interest & Others
Total Liabilities
Assets
Gross Block
Less: Acc Depreciation
Net Block
CWIP
Investments
Inventory
Debtors
Loans and Advances
Other Current Assets
Cash
Total Current Assets
Current Liabilities
Provisions
Current Liabilities & Prov
Net Current Assets
others
Application of Funds
Ratio Analysis
FY13
FY14
FY15E
FY16E
6,316.4
42,155.6
48472.0
1909.1
2369.5
52750.6
6,316.4
36,088.1
42404.5
171.5
2369.5
44945.5
6,316.4
42,189.5
48505.9
171.5
2369.5
51046.8
6,316.4
50,902.1
57218.5
171.5
2369.5
59759.5
39010.0
25544.9
13465.1
3496.0
2395.0
5617.8
10480.2
17370.1
4248.9
62236.6
99953.7
17222.9
51591.3
68814.2
31139.5
2255.0
52750.6
39010.0
27398.8
11611.3
7631.4
3632.3
5558.1
8241.0
7769.6
5437.5
52389.5
79395.7
18883.1
40413.9
59296.9
20098.7
1971.7
44945.5
41510.0
29514.1
11995.9
8631.4
3732.3
6557.7
9086.8
28640.3
4586.2
61058.5
109929.5
20192.9
65021.2
85214.1
24715.4
1971.7
51046.8
47010.0
31839.6
15170.4
7131.4
3832.3
8976.7
8198.7
9475.0
6202.6
80356.0
113209.1
19418.0
62137.5
81555.4
31653.6
1971.7
59759.5
(Year-end March)
Per share data (|)
Adj EPS
Cash EPS
BV
DPS
Cash Per Share
Operating Ratios (%)
EBITDA Margin
PBT / Total Operating income
PAT Margin
Inventory days
Debtor days
Creditor days
Return Ratios (%)
Adj RoE
Adj RoCE
RoA
Valuation Ratios (x)
P/E
EV / EBITDA
EV / Net Sales
Market Cap / Sales
Price to Book Value
Solvency Ratios
Debt/EBITDA
Debt / Equity
Current Ratio
Quick Ratio
[
Source: Company, ICICIdirect.com Research
FY13
FY14
FY15E
FY16E
27.5
30.3
76.7
14.0
98.5
23.9
27.1
67.1
29.0
82.9
23.7
27.0
76.8
12.0
96.7
27.8
31.5
90.6
12.0
127.2
26.5
36.6
25.4
31
56
92
23.2
33.3
22.0
30
44
100
22.5
30.6
20.3
30
45
100
22.1
33.3
22.3
36
38
90
35.8
32.3
32.9
35.6
32.8
33.6
30.8
29.7
29.3
30.7
26.2
29.4
12.7
8.9
2.4
3.2
4.6
14.6
10.6
2.5
3.2
5.2
14.8
9.7
2.2
3.0
4.6
12.6
8.1
1.8
2.8
3.9
0.1
0.0
1.5
1.4
0.0
0.0
1.3
1.2
0.0
0.0
1.3
1.2
0.0
0.0
1.4
1.3
[
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 3
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey
Head – Research
[email protected]
ICICIdirect.com Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
[email protected]
ICICI Securities Ltd | Retail Equity Research
Page 4
Disclaimer
ANALYST CERTIFICATION
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Page 5