on recent price increases; and (v) higher diesel costs; partly offset by a sharp decline in OBR provision. Excluding OBR adjustment, Ebitda/t declined by a higher 14% y-o-y to R299/t. Total operating costs were flat y-o-y at R1,156/t but excluding the non-cash OBR provision, the total per tonne costs were up 2% y-o-y.
Valuation/risks: We maintain our Hold rating with a target price of R294. We also revise our earnings per share estimates by -3.2% in FY14 and -3.6% in FY15 to factor in lower realisations and lower OBR provisions. Upside risk is higher-than-expected increase in notified prices. Downside risk is diversion of e-auction coal to power consumers.
The stock has seen a sharp correction YTD (year-to-date) of 21% on concerns of government stake sale and falling international prices. With (i) continuing weak demand and prices of e-auction coal due to both weak macro activity and falling international coal prices; (ii) lack of clarity on the impact of the joint third-party sampling of coal; and (iii) uncertainty over the timing of another price hike in an election year required in order to maintain a flat Ebitda/t given the recent cost increases; will keep the valuations subdued for some time. While we expect the stock to trade at our DCF (discounted cash flow) based valuation of R348 in the longer-term once all the above concerns are addressed, in the interim, we however, expect the valuations to remain subdued and maintain our price target based on a 6x FY15 EV/Ebitda (enterprise value/earnings before interest, taxes, depreciation, and amortisation) multiple at Rs 294.