Accumulate Coal India; target of Rs 376: Dolat Capital

Dolat Capital is bullish on Coal India (CIL) and has recommended accumulate rating on the stock with a target of Rs 376 in its November 12, 2012 research report.

“Coal India’s, key concern emerging from the result was the 11%QoQ fall e-auction realisations and higher employee cost. Provision writeback of Rs 5.7bn and lower depreciation negated the impact of lower EBITDA of Rs 28.61bn (DCe: Rs 28.93bn) and higher tax rate, leading to inline PAT of Rs 30.78bn(DCe: Rs 30.75bn). As expected FSA realizations rose 5%YoY/ 1.6%QoQ to Rs 1287 per tonne due to full impact of price hikes taken at WCL. There has been no breakthrough in terms of CIL signing new FSA with power producers on imbroglio revolving around price pooling. Although CIL dispatches in H1FY13 had been encouraging, H2FY13 performance on higher base would be critical. CIL stock performance in the near term can be under pressure given the weakness in e-auction prices, cost pressures and muted earnings growth.”

“E auction realizations dropped by 6.3%YoY/10%QoQ to Rs 2282/mt (Dce: Rs 2400/mt). However higher FSA realisations which were higher by 5%YoY/1.6%QoQ to Rs 1287 per tonne (DCe: Rs 1275/mt) reduced the impact on blended realization which increased 2.9%YoY to Rs 1442/mt (DCe: Rs 1450/mt). Net sales grew by 10.8%YoY to Rs 145.7bn (Rs 146.5bn) on back of 7.8% increase in dispatches of 101 mn tonnes (inline) and realisations increase of 2.9%YoY. FSA dispatch quantity increased by 9.2%YoY to 85.7 mn tonnes whereas E Auction quantity rose by by 4.5%YoY to 11.7 mn tonnes.”

“We have cut our operating earnings estimate for FY13 by 6%, however PAT estimates have been retained. We have also moderated our FY14 estimates given the high employee cost and the unlikleyhood of CIL increasing coal prices given the pressure from government in the election year. CIL is currently trading at 13.5xFY13EPS and 12.6xFY14EPS, and 12xFY13EPS and 10.9x FY14 after adjusting for OBR. We maintain our Accumulate rating with a target price of Rs 376 ( (10xFY14EPS + Rs 103 cash per share),” says Dolat Capital research report.

FIIs holding more than 30% in Indian cos

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