INDY 9M18 results: below; 3Q18 net profit grew by 100% QoQ
INDY booked 9M18 net profit of USD112mn (+38% YoY) which accounts 51% and 41% of our estimate and consensus which is below. INDY’s 9M18 core net profit is USD164mn (+93% YoY) that accounts 57% and 68% of our estimate and consensus. For the non-core item, INDY booked sizable amortization of intangible assets of USD102mn in 9M18 which we already expected. The lower than expected net income is due to lower than expected coal ASP (realized 9M18 ASP is -8% to our FY18 ASP estimate), higher than expected cash cost (+6% higher than ours) driven by higher than expected stripping ratio (+5% higher than ours).
Quarterly wise, INDY booked 3Q18 net profit of USD36mn (+100% QoQ, +19% YoY) while the core profit is USD51mn (+39% QoQ, +43% YoY) as INDY booked amortization of USD34mn in 3Q18. The quarterly net profit increase is mainly due to the increase of coal ASP (+2% QoQ) and coal production (+6% QoQ) helped by INDY’s relatively high operating leverage.
Valuation. Using annualized INDY’s 9M18 net profit/core profit, INDY trades at 5.2x/3.6x PE 2018F. Using our estimate INDY trades at 3.8x PE 2018F.
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