Accumulate Coal India; target of Rs 381: Aditya Birla Money

Aditya Birla Money is bullish on Coal India and has recommended accumulate rating on the stock with target of Rs 381 in its August 16, 2012 research report.

“CIL’s consolidated net sales grew 13.8% YoY to `165.0bn on account of higher (1) FSA coal realisations (~2% QoQ increase to `1267 per tonne) (2) 6.4% YoY growth in sales volume to 113.04mn tonnes and (3) e-auction sales volume. Production grew 6.4% YoY to 102.47mn tonnes. E-auction sales volume declined marginally by 0.4% YoY to 13.48mn tonnes. E-auction coal realisations were up 14.1% YoY and declined 10.2% QoQ to `2561 per tonne. The QoQ decline in e-auction coal realisations is due to change in grade mix. CIL’s consolidated EBITDA was flattish at `48.2bn on account of a 25.8% rise in employee costs to `61.3bn. CIL’s consolidated PAT grew 8.0% YoY to `44.7bn on account of higher non-operating income, which increased 38.0% YoY to `17.3bn (excluding recovery of transportation charges).”

“On a conservative basis, we had earlier modelled for 26% profit sharing from FY13E onwards. We now defer it to FY14E as the bill is stuck at the Standing Committee level with states raising objections and is unlikely to come into effect in FY13E. Infact, there could be a major upside risk for Coal India, if the 26% profit sharing provision is changed into an additional royalty to be paid by coal mining companies, which would be a pass-through for CIL as per its pricing formula. On account of higher-than-expected FSA realisations and e-auction volumes, we raise our adjusted FY13E EPS and FY14E EPS by 7.2% and 2.3% to `25.3 and `30.4 respectively. We raise our FY13E e-auction volumes by 15.9% from 38.2mn tonnes to 44.3mn tonnes and keep our FY14E eauction volumes unchanged at 39.1mn tones.”

“With the revision of our earnings estimates, deferring of the impact of the 26% profit sharing bill to FY14E from FY13E and quarterly rollover of our 1 year forward DCF value, our 1 year target price increases by 3.3% to `381 from `369 earlier. Our target price implies a potential upside of 7.7% from the CMP. We, thus, retain our Accumulate rating on Coal India," says Aditya Birla Money research report.

Bodies Corporate holding more than 50% in Indian cos

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