Buy Coal India, says Ventura Securities

Ventura Securities is bullish on Coal India (CIL) and has recommended buy rating on the stock in its February 21, 2013 research report. According to the research firm, the company is expected to miss its production and sales targets for FY13 marginally on account of monsoon and transportation constraints.

"For Q3FY13, CIL posted a 12.9% YoY increase in net sales to Rs. 17,325 crore aided by 9% increase in off-take (120 mt v/s 110 mt) and 3.3% yoy jump in blended realisations (Rs. 1438/tonne v/s Rs. 1392/tonne). The off-take was higher due to improvement in rake availability. The net realizations have shown muted growth of just 3.3 % on yoy basis on the back of lower e-auction sales in Q3FY13 (less than 10%).

In Q3FY13, rake availability improved by 10.4% on YoY basis to 190/day (172/day in Q3FY13). Realisation from long term FSAs came in Rs 1229/ tonne (+6% YoY). Realisation from e-auction and washeries increased by 14% (Rs 3241/ tonne) and 19% (2496 /tonne) on yoy basis. The company is on track to achieve coal production of 464 mt and sales of 470 mt.

Despite 12.9% YoY growth in topline, EBITDA declined by 5.3% on YoY basis to Rs 4288.3 crore on account of higher employee costs and higher other expenses (+28% YoY). EBITDA per tonne for Q3FY13 was Rs 357/ tonne v/s Rs 414/tonne in Q3FY12. However, boosted by higher other income (+25.7% on YoY basis), the net profit increased by 8.9% to Rs 4395.1 crore.

Coal India's results were better than street estimates on account of higher off take. We expect Coal India to miss its production and sales targets for FY13 marginally on account of monsoon and transportation constraints. While demand for coal (for utilities would only increase), we believe, volume ramp up and revision in notified price of coal (to contain wage inflation) are key catalyst for the outperformance of the company. The uncertainty of pending environmental and forest clearances of its projects and lack of clarity in coal price pooling still remains an overhang on the stock. Any approval for the same would bring to fore long term visibility. At a CMP of Rs. 340, the stock is trading at 11.6x and 10.4 its FY14E and FY15E consensus earnings estimates and we recommend a BUY on the stock," says Ventura Securities research report.

FIIs holding more than 30% in Indian cos

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