Buy Coal India; target of Rs 408: Motilal Oswal

Motilal Oswal is bullish on Coal India and has recommended buy rating on the stock with a target of Rs 408 in its August 14, 2012 research report.

“Coal India reported PAT at INR44.7b (up 8% YoY) higher than our estimate of INR42.9b led by higher other income at INR20.7b v/s our est of INR19b. Revenues stood at INR165b (up 14% YoY), lower than our estimate of INR168b led by lower market linked sales. However EBITDA for the company stood at INR48b (flat YoY) in-line with our estimate of INR48.1b led by lower than estimated staff cost and OBR provisioning. The benefit was partly negated by higher cost of inventory, other expenditure.”

“During the quarter vis-à-vis our estimates market linked revenues were lower by INR9b led by lower E-Auction realization at INR2,562/ton (v/s estimate of INR3,000/ton) and lower E-Auction volume at 13.5m tons (v/s estimate of 15m tons). However FSA revenues stood at INR120.2b, v/s estimate of INR114.5b led by higher realization at INR1,261/ton v/s our estimate of INR1,206/ton. During the quarter production and offtake for the company stood at 102m tons (up 6.4% YoY) and 113m tons (up 6.4% YoY). In 1QFY13, the dispatches through rail has been higher by 11% YoY, as rakes availability improved to 177 rakes/day v/s 164 rakes/day YoY. Also, the July 2012 month production/dispatch have been at 31.8 / 36.2 m tons and Coal India targets production/ dispatches of 96 / 107m tons during 2QFY13. Owing to possible delta in 2QFY13E, we thus revise our FY13E production / dispatch numbers at 468 / 470m tons (vs earlier 462/464m tons).”

“We maintain our earnings estimate for Coal India, as gain from higher volumes, FSA realization and other income is negated by ~INR370/ton lower E-auction realization now. We expect Coal India to report consolidated PAT of INR178b in FY13E (up 11% YoY) and INR192b in FY14E (up 8% YoY). The stock trades at PER of 11.5x FY14E,” says Motilal Oswal research report.

Non-Institutions holding more than 90% in Indian cos  

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