Accumulate Coal India; target of Rs 375: Dolat Capital

Dolat Capital is bullish on Coal India and has recommended accumulate rating on the stock with a target of Rs 375 in its May 30, 2012 research report.

“Coal India, dispatches rose 8.5%YoY/11.4%QoQ to 122.45mn tones, whereas production increased 10%YoY/26.2%QoQ to 144mn tonnes. FSA dispatch quantity increased by 9.3%YoY/8.6%QoQ to 102 mn tonnes whereas Blended realizations were up 19.2%YoY/13.6%QoQ to Rs 1581 per tonne better than our estimates of Rs 1462 per tonne. The bonus payment at Rs 10bn was higher than our estimate of Rs 6.5bn. However after adjustment of the bonus the realizations for FSA coal have increased by 7.6% to Rs 1251 per tonne.”

“CIL employee cost increased by 97.2%YoY/61.3%QoQ to Rs 90.68bn (DCe: Rs 87.5bn) as it made final provisions for the wage settlement agreed for workers during the quarter. Employee cost contains Rs 25bn of the onetime provision for increase in actuarial valuations and Rs 2bn has been provided for lesser provision in earlier quarters. CIL expects the total wage bill to increase by 7% in FY13. EBITDA per tonne fell by 25.2%QoQ/32.9%YoY to Rs 308 per tonne (DCe Rs 302) as higher cost took toll on higher realizations. EBITDA fell by 16.8%QoQ/ 27.1%YoY to Rs 37.85bn (DCe: 36.64bn). CIL other income has increased by 25.7%YoY/98%YoY to Rs 23.3bn (DCe Rs 19.8bn) due to higher interest income which rose by 15%QoQ to Rs 16.45bn CIL has a dispatch target of 470mn tonnes (8% growth) for FY13 and production target of 464mn tonnes (6.5% growth). CIL aims to liquidate 6-8mn tonne of inventory in FY13 .CIL currently has an inventory of 63mn tonnes at pits. Rake availability for CIL increased by 3.7% to 168 rakes per day in FY12. WCL and ECL has suffered loss of revenue of 7.7% and 3.3% post the shift to the GCV based pricing which the management is looking to correct and would see a price increase from these 2 fields.”

“CIL stock has corrected by 11.1% over past 1 month given the concerns regarding the adverse impact of signing of FSA with Power Company at 80% trigger level which we believe is addressed given the low penalty. We expect CIL earnings to grow at a 12%CAGR primarily driven by volumes and productivity growth. Maintain Accumulate with a price target of Rs 375 (13x core FY13EPS + Rs 85 Cash per share),” says Dolat Capital research report.

Public holding more than 90% in Indian cos

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