Accumulate Coal India; target of Rs 370: PLilladher
Prabhudas Lilladher is bullish on Coal India (CIL) and has recommended 'Accumulate' rating on the stock with a target of Rs 370 in its May 29, 2013 research report.
June 08, 2013 / 12:30 IST
Prabhudas Lilladher's research report on Coal India (CIL)
"Coal India (CIL) reduced prices of high grade (G3-G4) coal by 12 percent, While, in rest of the grades of non-coking coal (except G5) and BCCL’s NLW coal (around 22m tonnes), it took an increase of 10 percent. In addition to this, CIL introduced special premium of Rs300/t on coal produced from Rajmahal mines (14mt/yr). Management expects incremental revenue of Rs21.2bn in FY14.High dividend pay-out, now a reality: Management indicated aggressive dividend policy with dividend pay-out at 100 percent of net profit-capex. Based on this, dividend pay-out would be 63 percent (adjusted for DDT) or Rs18/share against 51 percent or Rs14/share. However, management remained averse to share buy-back.Rise in cost by Rs18-20bn due to hike in diesel prices and wages of outsourced labour: Management expects escalation in FY14’s cost by Rs9-10bn due to upward revision in wages of outsourced labour. Hike in diesel prices would further add Rs9-10bn to the cost.Management optimistic on margin expansion: Despite steep rise in costs, insufficient price increase in FSA/MoUs and weak e-auction prices, management expect expansion in FY14 margins. However, management sounded unclear on the levers of expansion in margin.We were positively surprised with the management’s outlook of margin expansion in FY14 despite a steep rise in costs and weak e-auction realisations. Management indicated aggressive dividend policy with pay-out as high as 63 percent (FY13:51 percent) in FY14. Stock trades at attractive valuations (EV/EBITDA of 6.0x FY14E and P/BV of 2.7x FY14) with rich dividend yield at 5.5 percent and structural play on reforms like MDO and investment in rail projects. We maintain our 'Accumulate' rating with PT of Rs 370, EV/EBITDA of 6x FY15," says Prabhudas Lilladher research report.Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. 
Read More
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
