Buy Coal India: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Coal India and has recommended buy rating on the stock in its May 28, 2012 research report.

“Coal India (CIL) reported Q4FY12 EBITDA in line with our expectation. However, CIL beat our expectation on PAT level on the back of higher-than-expected other income and lower depreciation. We maintain our ‘BUY’ rating, given the strong volume expansion, concerns overdone for new FSAs deadlock and attractive valuations following sharp correction in the stock price.”

“Realisations grew ahead of our expectation at Rs1,584 (+13.5%QoQ/+20%YoY, PLe:Rs1,493)/tonne (t) on the back of higher-than-expected bonus (Rs10bn v/s PLe:Rs6.5bn), higher realisations in FSAs adjusted for Bonus (Rs1250 v/s PLe: Rs1186) and stable realisations in E-auction against our expectation of fall. Offtake grew 7.6% at 122.8mt (PLe: 122mt). However, the benefit of higher realisations was entirely undone by higher-than-expected employee cost and OBR adjustment. CIL’s employee cost stood at Rs90.7bn (+89% YoY/+61% QoQ, PLe: Rs86bn) on account of increased wages under the new wage agreement. OBR adjustment grew 66% YoY/150% QoQ at Rs19bn (Rs9bn) or Rs132 (PLe:Rs75)/t. Total cost/t rose 45% YoY (30% QoQ) at Rs1,275 (PLe:Rs1,179); leaving EBITDA/t in line with our expectation at Rs309 (PLe:Rs313). Hence, EBITDA grew in-line with expectation at Rs37.9bn (PLe: Rs38.1bn), down 24% YoY. Thanks to higher-thanexpected interest and other operational income and lower depreciation, CIL’s adjusted PAT grew ahead of our expectation at Rs39.8bn (Rs36.2bn), down 5% YoY.”

“CIL put rest to doubts on its performance by delivering ~8% growth in despatches during CY till date. The outlook remains strong seeing the targets set by Indian Railways. While, with respect to presidential directives, we see marginal downside risk to earnings, given the smart investor friendly stance made by the management. Current valuations at P/E of 9.4x core FY13 EPS warrants strong rationale for our BUY rating,” says Prabhudas Lilladher research report.  

FIIs holding more than 30% in Indian cos

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.

To read the full report click on the attachment

Read More