Buy Coal India; target of Rs 370: Aditya Birla Money
Aditya Birla Money is bullish on Coal India and has recommended buy rating on the stock with a target of Rs 370 in its June 6, 2013 research report.
June 07, 2013 / 12:48 IST
Aditya Birla Money`s research report on Coal India
“Coal India Ltd. (CIL) Q4FY13 results were lower than our expectations on account of lowerthan- expected e-auction coal realisations and beneficiated non-coking coal sales volume. Lower non-cash expenses in the form of overburden removal adjustment costs and provisions for write-off, and perhaps non-recurring benefits from lower welfare expenses gives a misleading positive picture on the net profit front.” “CIL’s consolidated net sales grew 2.5 percent YoY to Rs199.0bn primarily on account of a 5.7 percent YoY growth in sales volume to 129.9mn tonnes. Production declined 0.9 percent YoY to 143.3mn tonnes. E-Auction coal realisations declined 19.1 percent YoY to Rs2308 per tonne while FSA sales realisation grew 3.3 percent to Rs1273 per tonne. Beneficiated noncoking coal sales volume declined 41.6 percent YoY to 2.95mn tonnes. E-auction sales volume grew 1.2 percent YoY to 14.9mn tonnes. CIL’s consolidated adjusted EBITDA declined 2.6 percent YoY to Rs61.2bn, down 2.6 percent YoY on account of higher contractual expenses and employee costs. EBITDA margin declined ~163bps YoY to 30.7 percent. CIL’s consolidated adjusted PAT declined 5.7 percent YoY to Rs54.0bn on account of lower non-operating income at Rs22.1bn, down 5.2 percent YoY, higher depreciation and higher tax rate at 31.2 percent, up 114bps YoY.” “Post the Q4FY13 results, CIL has announced price hikes on lower grade coal (below GCV of 5800/kg) by 10- 11 percent and lowered prices of higher grade coal (above GCV of 5800/kg) by 10-11 percent. On a net basis, this is expected to raise revenues by Rs21bn for FY14 and Rs25bn on an annualised basis. However, increase in costs, particularly employee expenses and contractual expenses, would offset the benefits from the price rise. CIL is likely to just about maintain FY14E profitability at FY13 levels. On account of coal pricing adjustments (below our expectations due to reduction in higher grade coal prices), higher costs and lower non- operating income, we reduce our adjusted FY14E EPS by 9.5 percent to Rs27.4. With the revision of our earnings estimates downwards, reduction in higher grade coal prices and quarterly rollover of our 1 year forward DCF value, our 1 year target price decreases by 7.5 percent to Rs370 from Rs400 earlier.”“Please note that in the event of the 26 percent profit sharing in mining clause being replaced by an additional royalty based compensation to coal projects-affected people, our target price would increase by 23 percent to Rs455. Our current 1 year target price of Rs370 implies a potential upside of 14.4 percent from the CMP. We maintain our BUY rating on Coal India,” says Aditya Birla Money research report. Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. 
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