Buy Coal India; target of Rs 370: A C Choksi

A C Choksi is bullish on Coal India and has recommended buy rating on the stock with a target of Rs 370 in its May 30, 2012 research report.

“Coal India, net sales for the quarter ended 31st March 2012 increased by 29.4% to `194.2 bn from `150.1 bn registered in same period previous year. Sales for full year grew by 24.3% to `624.2 bn, in line with our expectation of `622.8 bn. Q-o-Q sales grew by 26.5%. This was primarily due to better realizations. There has been a price increase of ~7% owing to GCV in the quarter. Improvement in E-auction share to around 11.5% for the year also boosted the blended realization. Blended realization came around `1500/tonne. CIL received an incentive of `10 bn for supplying 314 MT to FSA holders in FY 12 as against ACQ of 306 MT and trigger level of ~275 MT. Two subsidiaries of CIL; Western Coalfields (WCL) and Eastern Coalfields (ECL)  are set to revise their price upwards as both of them got hit due to GCV.”

“PAT decreased marginally by 4.9% to `40.1 bn in the quarter. On q-o-q PAT growth was flat (-0.6%). CIL’s FY 12 PAT was better than our estimates at `147.9 bn (vs estimate of `143.5 bn). It showed a  growth of 36%. EBITDA for the quarter grew by 24.3% y-o-y and de-grew by 16.7% q-o-q to `37.9bn. FY12  EBITDA rose by 16.3% to `156.7 bn.  EPS stood at `6.4 for the quarter. FY 12  EPS came at `23.4 vs our expectation of `22.7. Volume growth was decent for the quarter, but flat for full year  Production and offtake growth was at 26.2% & 11.4% respectively during 4Q FY 12. Production was 144.6 MT (up by 9.7% q-o-q ) and Offtake was 122.8 (up 7.6%). Production and offtake both were stagnant for FY12 and stood at 436 MT(up 1%) and 433 MT(up 2%) respectively. Non coking coal production was 393 MT (90.1%) and coking coal was 43 MT (9.9%). The company has set a target of producing 464 MT and dispatching 470 MT in FY 13. The company is confident to get the required rakes this fiscal to achieve its offtake target.”

“We had initiated coverage on Coal India on 26th November, 2011 with a target price of `346, which was achieved on 13th January, 2012. After meeting the management, we had revised our target price upwards to `365 on 20th January, 2012 which was achieved on 20th April, 2012.  At CMP of `322, CIL is trading at an EV/EBITDA of 9.4(x), P/E of 13.7(x), EV/Sales of 2.4 (x) & P/S of 3.3(x). Post expectation beating FY 12 results, we  upgrade our rating on the company from HOLD to BUY with a revised target price of `370. We believe the company has strong fundamentals and has sound long term prospects,” says A C Choksi research report.   

FIIs holding more than 30% in Indian cos

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