Accumulate Coal India; target Rs 385: Angel Broking

Angel Broking is bullish on Coal India (CIL) and has recommended accumulate rating on the stock with a target price of Rs 385 in its August 16, 2012 research report.

“Coal India Ltd (CIL)’s 1QFY2013 results surprised us positively due to lower-than-expected staff and other costs. Further, it remains well-poised to meet its FY2013 offtake target given a 6.5% yoy increase reported in 1QFY2013. CIL’s 1QFY2013 net sales increased by 13.8% yoy to Rs 16,500cr (in line with our estimate of Rs 16,361cr) primarily due to increases in both volumes as well as average realization. Blended average realization on coal sales increased 6.8% yoy to Rs 1,461/tonne and offtake grew by 6.5% yoy to 113mn tonne.

The EBITDA increased by only 0.3% yoy to Rs 5,133cr due to a 25.8% yoy growth in staff costs to Rs 6,130cr (although it was below our expectations). Other income rose by 32.9% yoy to Rs 2,071cr on account of higher cash balance and increased treasury yield. Hence, the adjusted net income grew by 7.2% yoy to Rs 4,458cr (above our estimate of Rs 4,090cr).

CIL’s 1QFY2013 results surprised us positively due to lower-than-expected staff and other costs. Further, it remains well-poised to meet its FY2013 offtake target with 6.5% yoy increase reported in 1QFY2013. Moreover, an increase in blended realization due to shifting to gross calorific value (GCV)-based pricing is expected to offset the rise in staff costs in FY2013. Valuing the stock at 8.0x FY2014 EV/EBITDA, we derive a target price of Rs 385 and recommend Accumulate on the stock,” says Angel Broking research report.

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