3 September 2015
Update | Sector: Utilities
Coal India
BSE Sensex
25,765
S&P CNX
7,823
CMP: INR346
TP: INR439 (+27%)
Buy
Analyzing E-auction data for July
Supply surges; poor demand for higher grade coal
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap.(INR b)/(USD b)
AvgVal.INRm/Vol‘000
Free float (%)
COAL IN
6,316.4
447/332
-11/7/-3
2,185/33.0
1668/4413
20.4
The average E-auction realization was down ~INR270/t MoM to ~INR1,605/t in
July, the lowest since April 2013. The share of lower grade coal in the mix of
allocated quantity (demand) is increasing, aided by production growth.
Downward trending international coal prices (Richards Bay Index) affected
higher grade coal demand.
E-auction quantity offered in July at a two-year high
Financial Snapshot (INR Billion)
2015 2016E 2017E
Y/E Mar
Sales
EBITDA
NP
EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div. Yield (%)
15.9
5.4
7.9
6.0
14.8
5.2
7.5
5.1
12.5
5.0
6.3
6.0
720.1 766.0 904.1
152.3 162.6 201.3
137.3 148.1 174.8
21.7
-14.1
63.9
34.0
54.3
112.9
23.5
7.9
66.2
35.4
56.7
90.0
27.7
18.0
69.0
40.1
63.3
90.0
Coal India offered ~8.1mt in E-auction in July, only the second time in the
last two years that it has touched such high volumes.
Demand—although stable at ~5.5mt—paled in comparison to supply,
thereby putting pressure on prices. The quantity allocated to quantity
offered ratio was at a historical low of ~68%, highlighting that demand is yet
to catch up. We expect import substitution to start gradually.
Robust demand for lower grade, poor demand for higher grade
Blended realization in July was down ~INR270/t MoM to ~INR1,605/t,
driven by mix change and premiums.
The realization fall was sharper in lower grade (G9-G17) coal, ~INR225/t
MoM, but the demand was robust.
Although the fall in realization of higher grade (G1-G8) was lower
(~INR100/t), the volume loss was higher.
Shareholding pattern (%)
As on
Jun-15 Mar-15 Jun-14
Promoter
79.7
79.7
89.7
DII
8.6
8.8
2.8
FII
9.2
9.0
5.5
Others
2.6
2.5
2.0
FII Includes depository receipts
Stock Performance (1-year)
Volume growth on track, operating leverage at play; maintain Buy
Coal India is targeting production of 550mt (+12% YoY) in FY16. As an
advance planning, high stripping (+34% YoY) was carried out in 1QFY16. We
expect import substitution to start gradually, thereby increasing demand in
E-auction.
Accelerating production, increasing net attrition and increasing share of
lower-cost contracted production augur well, and will provide significant
operating leverage.
Coal India’s adjusted EBITDA is likely to rise at a 12.8% CAGR to INR386b by
FY20, largely benefiting from operating leverage, transparent pricing for
non-power sector and 10% volume CAGR. In the recent analyst meet, the
management reiterated its focus on growing production.
We value the stock at INR439, based on DCF valuation (WACC of 12.8%).
The stock is trading at an EV of 6.4x FY17E adjusted EBITDA. Maintain
Buy.
Sanjay Jain
(SanjayJain@MotilalOswal.com);+9122 3982 5412/Nalin
Bhatt
(NalinBhatt@MotilalOswal.com) +9122 3982 5429
Dhruv Muchhal
(Dhruv.Muchhal@MotilalOswal.com); +9122 3027 8033
Investors are advised to refer through disclosures made at the end of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.

Coal India
Exhibit 1: E-auction supply surged in seasonally weak
months…
Offered (mt)
Exhibit 2: …while demand was stable as evident by allocated
quantity
Allocated (mt)
Source: MOSL, MJunction
Source: MOSL, MJunction
Exhibit 3: Allocation (Bookings) to Offered quantity – 3 months avg.
Despite stable demand,
supply surge during
seasonally weak months
resulted in lower allocation
ratio…
Allocated : Offered (3m avg)
86
90
92 91
90
88
86 87
84 83 84
84 83 84
84
82
81 81 82
84
82 82 83 83 81
78
73
Source: MOSL, MJunction
Exhibit 4: Premium realized over reserve price – INR/t
…pressuring realized
premium over reserve price
to fall to ~INR150/t, the
lowest over our records.
Premium over reserve price - INR/t
Source: MOSL, MJunction
Average reserve price is
declining…
Exhibit 5: E-auction average reserve price – an indicator of average grade
Realization at res. Price - INR/t
Source: MOSL, MJunction
3 September 2015
2

Coal India
…due to increase in share of
lower grade coal
Exhibit 6: Share of lower grade (G9-G17) coal in total E-auction quantity booked (%)
G9-G17 as % of CIL alloct. Qty
64
62 63
68 68 69 69
53
45
48
45
55
68
71 72 70 71
76 74
79
51
53
55
50
48 48
59
Source: MOSL, MJunction
Higher grade coal bookings
suffered particularly. Down
from ~70% of volumes
offered in Jan 2015 to ~51%
in July.
Exhibit 7: Quantity and allocation of higher grade coal in E-auctions
Qty offered - t
80
75 73 75
71
77 76
Allocated : Offered - 3m avg
76 74
71 74 73 69
61
51
82 80 80 80 80 81 82 83 82 82 82 81 82
Source: MOSL, Bloomberg
Exhibit 8: Richards Bay thermal coal price trend
5,500
5,000
4,500
4,000
3,500
3,000
Richards Bay FoB - INR/t (6,000 Kcal)
Source: MOSL, Bloomberg
3 September 2015
3

Coal India
E-auction montly monitor – July 15
Exhibit 9: Monthly E-auction allocated quantity
Allocated (mt)
Exhibit 10: Monthly E-auction offered quantity
Offered (mt)
Source: MJunction
Source: MJuntion
Exhibit 11: Average E-auction realization – INR/t
Avg. realization - INR/t
Exhibit 12: Realization trend – CIL v/s. exchanges
E-auction real. - CIL - INR/t
E-auction real. - exchanges - INR/t
3,100
2,700
2,300
1,900
Source: MJunction
Source: MJuntion
Exhibit 13: Average realization (G1-G8 grade)– INR/t
Act. Real. (G1-G8) - INR/t
at reserve price - INR/t
Exhibit 14: Average realization (G9-G17 grade)– INR/GCV
Act. Real. (G9-G17) - INR/t
at reserve price - INR/t
Source: MJunction
Source: MJuntion
3 September 2015
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
FY11
502,336
7.6
365,872
136,464
27.2
413
17,654
737
49,615
2,162
165,525
55,959
33.8
109,566
109,566
13.9
110,202
12.1
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
FY16E
765,988
6.4
603,435
162,553
21.2
418
24,398
69
86,311
0
224,397
76,272
34.0
148,124
148,124
7.9
148,124
7.9
(INR Million)
FY17E
904,127
18.0
702,840
201,287
22.3
463
25,598
65
85,225
0
260,849
86,054
33.0
174,795
174,795
18.0
174,795
18.0
(INR Million)
FY17E
63,164
372,659
435,823
658
4,019
-19,591
420,909
568,080
336,925
231,154
91,594
28,134
849,408
74,312
106,514
61,808
105,150
501,625
779,382
11,394
767,987
70,027
0
420,909
FY11
63,164
269,978
333,142
326
13,664
-11,941
335,191
376,253
238,708
137,546
11,459
10,637
668,364
55,856
34,189
0
120,254
458,064
513,959
175,737
175,549
0
335,193
-444,401
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
FY16E
63,164
355,180
418,343
658
4,019
-19,591
403,430
508,080
311,327
196,752
71,594
28,134
843,124
62,958
90,240
61,808
105,150
522,968
736,175
9,654
726,521
106,949
0
403,430
3 September 2015
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
Cash 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
Leverage Ratio
Current Ratio
Net Debt/Equity (x)
FY11
17.3
17.4
24.4
52.7
3.9
30.5
19.8
14.2
6.6
10.0
1.1
80.1
FY12
25.7
34.7
64.0
10.0
46.2
13.5
10.0
5.4
7.8
2.9
74.3
33.1
35.5
4.8
1.5
32.9
55.1
36.7
57.7
FY13
28.1
36.0
76.7
14.0
57.3
12.3
9.6
4.5
6.9
4.0
72.4
56.0
30.0
4.5
1.4
36.0
57.1
FY14
25.3
33.7
67.1
29.0
132.2
13.7
10.3
5.2
7.9
8.4
76.5
43.7
29.5
4.3
1.7
35.6
52.1
FY15
21.7
31.5
63.9
20.7
112.9
15.9
11.0
5.4
7.9
6.0
76.3
43.2
31.3
4.7
1.9
34.0
54.3
FY16E
23.5
33.4
66.2
17.6
90.0
14.8
10.4
5.2
7.5
5.1
76.6
43.0
30.0
4.6
1.9
35.4
56.7
FY17E
27.7
38.3
69.0
20.8
90.0
12.5
9.0
5.0
6.3
6.0
77.6
43.0
30.0
4.6
2.1
40.1
63.3
-1.3
-1.4
-1.3
-1.2
-1.3
-1.2
-1.1
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
FY11
163,363
17,654
4,662
-55,959
129,720
-16,153
113,567
2,183
-13,970
-766
-5,967
0
-33,611
-5,836
-46,179
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
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
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
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
FY16E
222,953
11,345
-5,695
-76,272
152,331
-80,000
72,331
0
53,093
-26,907
0
0
-69
-133,312
-133,381
-7,957
530,925
522,968
(INR Million)
FY17E
266,349
11,947
-25,887
-86,054
166,355
-80,000
86,355
0
49,682
-30,318
0
0
-65
-157,316
-157,380
-21,343
522,968
501,625
Inc/Dec of Cash
69,570
123,963
40,332
-98,465
Add: Beginning Balance
390,778
458,064
582,028
622,360
Closing Balance
460,348
582,028
622,360
523,895
E: MOSL Estimates; * Adj EBITDA is ex. OBR and including transportation/loading income
3 September 2015
6

Coal India
NOTES
3 September 2015
7

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Coal India
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COAL INDIA
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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:
Kadambari Balachandran
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For Singapore
Motilal Oswal Securities Ltd
3 September 2015
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