Coal India Q3FY13 Net Up 9%

State-owned coal major, Coal India (CIL), has beat the street estimates by posting a 9% growth in its net profit to Rs 4395 crore in the third quarter of the current fiscal. On an average, the market was expecting a net profit of Rs 4000 crore. Its total income was also up 13% to Rs 17325 crore on a year-on-year basis.

During the quarter, the company, which is the world’s largest coal miner, reported a 2.4% rise in its total coal production to 117.37 million tonnes. The coal offtake, however, was higher by 9% to 120.45 MT. The total realisations were up 3.3% to Rs 1438 per tonnes year on year. Its realisations have increased by 0.4% as compared to the September 2012 quarter.

On the margins front, CIL has reported a decline in its EBITDA margins. During the quarter, its margins stood at 24.75% against 29.67% reported a year earlier. The decline in margins was due to the rise in the welfare expenses, which rose twofold in the quarter on a YoY basis. The power and fuel expenses, which form 4% of the sales, have risen by 38%. Its contractual and other expenses have also gone up by 19% and 58% respectively, which has bought its margins down. However, the good part of the result is that the company has reported a margin expansion on a sequential basis.

During the quarter, CIL has reported a decline in its finance cost. However, the decline is miniscule when compared with its profit before interest cost, and hence, it does not have any impact. The tax rate during the quarter was at 29% against 31% a year earlier.

With the net profit coming in higher than expected and the growth in coal offtake, one may expect a positive sentiment and high volumes on the stock. We, however, remain neutral on the counter as there is a limited 3% upside in the stock from the current market price.