For Dec-15, CIL reported production/offtake growth of 10.8%/9.7% respectively, led by offtake growth of 21% by MCL and 11% by NCL. Offtake growth for 9MFY16 remains strong at 9.8% and we do not see risks to our FY16 offtake volume growth estimate of 9.6%.
In Nov-15, CIL offered 8.1mt of coal in regular e-auctions, out of which 61% was sold. In addition, CIL offered 6.5mt in a special e-auction for the power sector, out of which 3.9mt was sold. Our analysis of CIL’s regular e-auction sales for Nov-15 suggests that premiums to notified prices for the regular e-auction have declined to 28% from 44% in Sep/Oct-15. On a blended basis, average regular e-auction realisation for Oct-Nov-15 was at Rs1,815/t, in line with our 2HFY16 e-auction realisation estimate of Rs 1,800/t.
Although the impending OFS remains an overhang on the stock price in the short term, we remain BUYers due to the structural improvement in production growth trajectory and inexpensive valuations (13.1x FY17E P/E).
Offtake growth at 9.7% in Dec-15: Coal India has reported production of 52.1mt for Dec-15 (up 10.8% YoY). MCL reported the strongest production growth of 23.3%, followed by CCL (13.5%), NCL (12.7%), WCL (12.6%) and ECL (10.5%).
For Dec-15, offtake growth was at 9.7%, led by 21.4% growth by MCL and 10.7% by NCL. Offtake growth for 9MFY16 remains strong at 9.8% and we believe the company is on track to achieve our FY16 offtake volume growth estimate of 9.6%.
We reiterate our BUY stance on Coal India (CIL), as we expect production CAGR of 9% over the next five years (FY15-FY20E) vs 1.4% over FY10- FY14; and auction of non-power linkages over the next 2 years to aid realisation growth.