Moneycontrol
Oct 11, 2017 05:39 PM IST | Source: Moneycontrol.com

Buy Coal India; target of Rs 335: Motilal Oswal

Motilal Oswal is bullish on Coal India has recommended Buy rating on the stock with a target price of Rs 335 in its research report dated October 10, 2017.

 
 
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Motilal Oswal's research report on Coal India


Coal India (COAL) announced an annual impact of INR56.7b on account of the  wage hike after it signed the  National  Coal  Wage  Agreement- X on 10 th October  2017 for a period of five years , from 1 st July 2016 to 30 th June 2021. According to our calculations, the average hike of 22% is higher than our estimate of 18%. Thus, we are raising our estimate for the annual wage bill by INR20b to INR364b in FY18E, and by INR12.3b to INR362b in FY19E. This will impact EBITDA and PAT by 11% in FY18E and by 6% in FY19E.


Outlook


We expect the stock to get re -rated because of the many levers that can drive upside to our estimates. Currently, there is shortage of coal, as power plants have destocked heavily. We are raising the valuation multiple from 7.5x to 8x FY19E EV/ EBITDA, and also increasing the target price to INR335 (from INR305), implying 17 % upside. The stock is trading attractively at 7.2xEV/EBITDA, 13.6x P / E and 5.5% dividend yield. Maintain Buy.


For all recommendations report, click here


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